![Page 1: The Contributions of Intangible Property to the U.S. Economy - Matthew Slaughter](https://reader033.vdocuments.site/reader033/viewer/2022061305/549d114dac7959ce2a8b4909/html5/thumbnails/1.jpg)
The Contributions of Intangible Propertyto the U.S. Economy
Matthew J. Slaughter Tuck School of Business at Dartmouth,
NBER, and CFR
White Paper sponsored by TIE CoalitionWashington, DC
June 24, 2013
![Page 2: The Contributions of Intangible Property to the U.S. Economy - Matthew Slaughter](https://reader033.vdocuments.site/reader033/viewer/2022061305/549d114dac7959ce2a8b4909/html5/thumbnails/2.jpg)
Three Central Messages
• Intangible property has long played a central role in driving growth in U.S. output, jobs, and income—but fragile future.
• Globally engaged U.S. companies, which create the large majority of America’s IP, increasingly rely on their worldwide operations to maximize the creativity and benefits of their U.S. inventions.
• Because foreign-affiliate production and sales tends to complement American IP investment, raising the U.S. tax burden on IP-related income of globally engaged U.S. companies would tend to reduce the quantity and quality of IP activity in the United States.
2
![Page 3: The Contributions of Intangible Property to the U.S. Economy - Matthew Slaughter](https://reader033.vdocuments.site/reader033/viewer/2022061305/549d114dac7959ce2a8b4909/html5/thumbnails/3.jpg)
Message #1:
IP’s Central Role in America—But Fragile
Future?3
![Page 4: The Contributions of Intangible Property to the U.S. Economy - Matthew Slaughter](https://reader033.vdocuments.site/reader033/viewer/2022061305/549d114dac7959ce2a8b4909/html5/thumbnails/4.jpg)
4
IP-Intensive Industries Among the Strongest
• The bottom line of these productivity-enhancing activities has been high and rising wages: 42% premium in 2010.
Source: U.S. Commerce Department
![Page 5: The Contributions of Intangible Property to the U.S. Economy - Matthew Slaughter](https://reader033.vdocuments.site/reader033/viewer/2022061305/549d114dac7959ce2a8b4909/html5/thumbnails/5.jpg)
5
Is America’s Speed Limit Decelerating?
• Even before the World Financial Crisis, post-2000 economic growth in America was slowing relative to 50 earlier years. Source: U.S. BEA
![Page 6: The Contributions of Intangible Property to the U.S. Economy - Matthew Slaughter](https://reader033.vdocuments.site/reader033/viewer/2022061305/549d114dac7959ce2a8b4909/html5/thumbnails/6.jpg)
6
America’s Productivity Growth Has Decelerated
• Over the 20th century, over 80% of U.S. growth in output was accounted for by growth in output per worker.
Source: U.S. BLS
![Page 7: The Contributions of Intangible Property to the U.S. Economy - Matthew Slaughter](https://reader033.vdocuments.site/reader033/viewer/2022061305/549d114dac7959ce2a8b4909/html5/thumbnails/7.jpg)
Slowing Productivity Growth Coincideswith Slowing Educational Attainment
• America’s dramatic educational upgrading of the 20th century largely stopped in my lifetime.– In 1969 the U.S. high-school graduation rate was 77.1%, up from
just 5% in 1900. That rate subsequently grew by about 0%.
• All while talent growth abroad accelerates (CFR).
7
![Page 8: The Contributions of Intangible Property to the U.S. Economy - Matthew Slaughter](https://reader033.vdocuments.site/reader033/viewer/2022061305/549d114dac7959ce2a8b4909/html5/thumbnails/8.jpg)
8
IP-Discovery Efforts Accelerating Abroad
• Efforts to discover IP have rapidly accelerated worldwide, such that U.S. innovativeness ranking widely seen as falling.
Source: NSF
![Page 9: The Contributions of Intangible Property to the U.S. Economy - Matthew Slaughter](https://reader033.vdocuments.site/reader033/viewer/2022061305/549d114dac7959ce2a8b4909/html5/thumbnails/9.jpg)
Voices Have Been Warning This for Many Years
“The educational foundations of our society are presently being eroded by a rising tide of mediocrity that threatens our very future as a Nation and a people … If an unfriendly foreign power had attempted to impose on America the mediocre educational performance that exists today, we might well have viewed it as an act of war.”
A Nation at Risk, commissioned by President Reagan, 1983
![Page 10: The Contributions of Intangible Property to the U.S. Economy - Matthew Slaughter](https://reader033.vdocuments.site/reader033/viewer/2022061305/549d114dac7959ce2a8b4909/html5/thumbnails/10.jpg)
Message #2:
Globally Engaged Companies Make Most IP—and Aspire to Connect It
to World
10
![Page 11: The Contributions of Intangible Property to the U.S. Economy - Matthew Slaughter](https://reader033.vdocuments.site/reader033/viewer/2022061305/549d114dac7959ce2a8b4909/html5/thumbnails/11.jpg)
11
Central U.S. Role of Multinational Companies
• Bottom line of these innovative activities of U.S. global companies is millions of good jobs at high wages.
Source: U.S. BEA
![Page 12: The Contributions of Intangible Property to the U.S. Economy - Matthew Slaughter](https://reader033.vdocuments.site/reader033/viewer/2022061305/549d114dac7959ce2a8b4909/html5/thumbnails/12.jpg)
12
Where These Companies See Growth is Abroad
• U.S. share of global GDP has fallen from 32.3% in 2001 to just 21.6% in 2011.
Source: U.S. BEA
![Page 13: The Contributions of Intangible Property to the U.S. Economy - Matthew Slaughter](https://reader033.vdocuments.site/reader033/viewer/2022061305/549d114dac7959ce2a8b4909/html5/thumbnails/13.jpg)
13
Meeting Demand Growth via Affiliate Sales
• Over 90% of these affiliate sales in recent years are abroad, not imports returning to United States.
Source: U.S. BEA
![Page 14: The Contributions of Intangible Property to the U.S. Economy - Matthew Slaughter](https://reader033.vdocuments.site/reader033/viewer/2022061305/549d114dac7959ce2a8b4909/html5/thumbnails/14.jpg)
14
IP-Intensive Industries Are More Global
• In United States, share of output accounted for by U.S. multinational parents is higher in IP-intensive industries.
Source: U.S. BEA
![Page 15: The Contributions of Intangible Property to the U.S. Economy - Matthew Slaughter](https://reader033.vdocuments.site/reader033/viewer/2022061305/549d114dac7959ce2a8b4909/html5/thumbnails/15.jpg)
15
IP-Intensive Industries Are More Global
• Worldwide, share of output accounted for by foreign affiliates is higher in IP-intensive industries than for all industries. Source: U.S. BEA
![Page 16: The Contributions of Intangible Property to the U.S. Economy - Matthew Slaughter](https://reader033.vdocuments.site/reader033/viewer/2022061305/549d114dac7959ce2a8b4909/html5/thumbnails/16.jpg)
16
Foreign Expansion Complements U.S. Activity
• A 10% increase in foreign-affiliate sales boosts U.S.-parent R&D investment by about 3.2%-5.0%.
Source: U.S. BEA
![Page 17: The Contributions of Intangible Property to the U.S. Economy - Matthew Slaughter](https://reader033.vdocuments.site/reader033/viewer/2022061305/549d114dac7959ce2a8b4909/html5/thumbnails/17.jpg)
Message #3:
Tax Policy Should Support, Not Stifle,
U.S. IP Activity
17
![Page 18: The Contributions of Intangible Property to the U.S. Economy - Matthew Slaughter](https://reader033.vdocuments.site/reader033/viewer/2022061305/549d114dac7959ce2a8b4909/html5/thumbnails/18.jpg)
U.S. Innovation Is Impeded by Poor Policies
18
![Page 19: The Contributions of Intangible Property to the U.S. Economy - Matthew Slaughter](https://reader033.vdocuments.site/reader033/viewer/2022061305/549d114dac7959ce2a8b4909/html5/thumbnails/19.jpg)
Conclusions
• Intangible property has long played a central role in driving growth in U.S. output, jobs, and income—but fragile future.
• Globally engaged U.S. companies, which create the large majority of America’s IP, increasingly rely on their worldwide operations to maximize the creativity and benefits of their U.S. inventions.
• Because foreign-affiliate production and sales tends to complement American IP investment, raising the U.S. tax burden on IP-related income of globally engaged U.S. companies would tend to reduce the quantity and quality of IP activity in the United States.
19