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In response to the concern that an increasing amount of high-technology manufacturing formerly performed in the United States is now being done overseas, with potentially harmful consequences to U.S. economic security, the Office of Science and Technology Policy asked the RAND Corporation to provide analytic support to the President’s Council of Advisors on Science and Technology. The support included a description of past and current trends of U.S. high-tech manufacturing, particularly with regard to computer and semiconductor manufacturing; a theoretical and empirical economic analysis of traditional and high-tech manufacturing; and an analysis of U.S. research and development statistics and of trends in choices of academic disciplines, focusing particularly on the fields of science and engineering. The authors conclude that U.S. high-tech exports still lead the world by a large margin, and U.S. high-tech companies are expected to maintain leading market shares for some time. U.S. manufacturing activities that have remained in the United States tend to be the most advanced and complex, while more routine manufacturing tends to locate overseas for economic advantages. Declines in U.S. manufacturing employment can be directly attributed to increased manufacturing productivity, which brings into focus the key problem of employment issues that have resulted from strong productivity growth. The authors make broad recommendations for U.S. decisionmakers, focusing on leveling the playing field with regard to trade practices and granting of incentives and on strengthening the innovation infrastructure base.

The research described in this report was conducted by the Science and Technology Policy Institute (operated by RAND from 1992 to November 2003) for the Office of Science and Technology Policy.

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