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For immediate release: November 16, 2010

Idea Production Increasing in Developing Economies, Says Dallas Fed’s Economic Letter

DALLAS—The U.S., Japan and Germany have historically been the global locomotive of ideas, but the landscape is changing, according to the latest issue of the Federal Reserve Bank of Dallas’ Economic Letter.

In “The Globalization of Ideas,” senior research economist Anthony Landry finds idea production has taken off in the developing BRIC economies (Brazil, Russia, India and China) and exports and imports of ideas have grown substantially.

Quantifying the flow of ideas is difficult, but patent filings can provide indirect evidence of the production of ideas, according to Landry. Patent filings in China have increased fifteenfold since 1995, with Brazil and India seeing estimated four-and sixfold increases, respectively.

Growth in nonresident patent filings—which help illustrate the import of ideas—outpaced the growth of resident patent filings in  the U.S., Japan, Germany and all of the BRIC countries except China, Landry states.

Ideas are intangible but are imbedded in capital goods like machinery, electrical equipment, computers and software, he notes. Gains in capital goods imports, which arise because it is possible to develop and produce ideas in separate locations, have driven the growth in U.S. output per hour since 1967.

“Lower transportation costs and the creation, reallocation and integration of global production facilities have made it possible to move the physical production of an idea where labor costs are low,” Landry writes. “U.S. capital and labor can therefore be reallocated to more productive uses.”

Those uses include high-tech manufacturing of aerospace and biotech products, health-care equipment and computer electronics, Landry says.


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