R&D Expenditures

This Great Graphic was posted in the Wall Street Journal, which it got from R&D Magazine.  It shows research and development expenditure in billions of dollars and as a percent of GDP.

Expenditures in dollar terms favor the larger economies.  This is in fact born out.  The four largest economies have the largest R&D expenditures (US, China, Japan and Germany).

Moreover, by using purchasing power parity currency conversion rates, the chart bolsters the value of the expenditures by those countries that have under-valued currencies.  Nor are all PPP measures the same.  The OECD estimates that Korean won is 30% under-valued and the yen is 7% over-valued.  The Big Mac Index would have the yen 36% under-valued and the won 25% under-valued.

As a percentage of GDP, South Korea is impressive, spending proportionately as much as Japan and more than the US and Germany.  For a large country and for a country that is investing nearly 30% of GDP, China’s R&D expenditures seem light.

Lastly, we note that the US has been the first to implement the UN-based agreement to include R&D expenditures as investment for GDP purposes.  Other countries will follow suit next year and in 2015.