• Note: We would like to thank Ana Aizcorbe, Ben Bridgman, Ernst Berndt, Ian Cockburn, Carol Corrado, Erwin Diewert, and Carol Robbins for helpful discussions and comments. The views expressed in this paper are solely those of the authors and not necessarily those of the U.S. Bureau of Economic Analysis, the U.S. Department of Commerce, the Federal Reserve Bank of New York, or the Federal Reserve System.

Adam Copeland, Money and Payment Studies, Federal Reserve Bank of New York, 33 Liberty Street, New York, NY 10045, USA (


We construct a price index for the scientific R&D services industry, a significant producer of R&D in the United States. Unlike most previous R&D price indexes, our index is not based on input costs but rather on measures of R&D sales. Consequently, unlike input-cost price indexes, our output-based index is able to account for changes in productivity and markups in the scientific R&D services industry. We compute that scientific R&D services prices increased, on average, by 7.14 percent at an annual rate from 1987 to 2006. Using our index, we find that real revenues grew at an annual average rate of 2.85 percent. We then propose using our index, in combination with an input-cost price index, to deflate total R&D nominal expenditures. We find that real total U.S. R&D expenditures grew at an average annual rate of 1.42 percent from 1987 to 2006.