1. Introduction

The expanding world-wide competition in research and 
development is giving rise to numerous attempts by a range of 
organizations to compare research and development expenditure 
among various countries. To make more accurate international 
comparisons of research and development (R&D) expenditure, an 
index is needed that will allow direct comparisons of the amounts 
of goods and services that can actually be purchased with the 
R&D expenditure of each country. (Note 1 ) We would like to 
advocate the development of purchasing power parties applicable 
to R&D expenditure (hereafter, "R&D PPPs") as a currency 
conversion rate that can perform this function.

Conversion based on currency exchange rates does not show the 
actual purchasing power of a particular country's R&D 
expenditure, and OECD and other purchasing power parities 
(hereafter, "International Comparison Program (ICP) PPPs") are 
calculated on bases that differ from the goods and services used 
in R&D. (Note 2)
We have studied R&D expenditure items and the price levels of 
these items and in this report have pointed out problems with 
applying ICP PPPs to R&D expenditure, completing trial 
calculations of R&D PPPs for 6 countries, including Japan. It is 
essential in calculating R&D PPP to analyze R&D expenditure 
items and match PPPs to these items; we have attempted here as 
detailed an analysis as possible using input-output tables and 
other sources. We have also added some comments on the use of 
R&D PPPs.