The innovation- growth link in OECD countries: Could other macroeconomic variables matter?. (November 2017)

• Record Type: Journal Article
• Authors: Pradhan, Rudra P.; Arvin, Mak B.; Bahmani, Sahar; Bennett, Sara E.
• Is Part Of: Technology in society. Volume 51(2017)
• Page Start: 113
• Page End: 123
• Publication Date: 2017-11
• Subjects: Innovation -- Economic growth -- ICT infrastructure -- Other macroeconomic variables -- Panel cointegration -- Granger causality; L96 -- O32 -- O33 -- O43; Technology -- Social aspects -- Periodicals; 303.483
• DOI: 10.1016/j.techsoc.2017.08.003
• Languages: English
• ISSNs: 0160-791X

Abstract

Abstract: This study investigates the Granger causal relationships between innovation, economic growth, information and communication technology (ICT) infrastructure, government consumption expenditure, gross capital formation, foreign direct investment, and trade openness. Using panel data from 32 high-income OECD countries from 1970 to 2016 and panel cointegration techniques, results show that these variables are cointegrated. The Granger causality tests further confirm that, taking other variables into account, there is bi-directional causality between innovation and economic growth in the long run. Moreover, both economic growth and innovation are generally impacted in the long run by the other variables that we consider. The short-run causality results reveal a diverse pattern of short-run adjustment dynamics among the variables including the possibility of feedback among some of them. Important policy implications for sustainable economic growth and higher innovation suggest elevating government consumption expenditure, increasing capital formation, further opening of countries' economies to trade, as well as improving ICT infrastructure. Graphical abstract: Note 1: PAR is the number of patents - residents; PAN is the number of patents - non-residents; PAT is the total number of patents - both residents and non-residents, RDE is the research and development expenditure; RRD is researchers in research and development activities; PEG is the per capita economic growth; ICT is information communication technology, and MED denotes other macroeconomic variables. The variables are defined more precisely inTable 1 . Note 2 : MED is comprised of four variables: government consumption expenditure, gross capital formation, foreign direct investment, and trade openness. The variables are defined more precisely inTable 1 . Note 3 : H1A, B : Patent - residents Granger cause economic growth and vice versa. H2A, B : Patent - residents Granger cause macroeconomic variables & ICT infrastructure and vice versa. H3A, B : Patent - non-residents Granger cause economic growth and vice versa. H4A, B : Patent - non-residents Granger cause macroeconomic variables & ICT infrastructure and vice versa. H5A, B : Total patents Granger cause economic growth and vice versa. H6A, B : Total patents Granger cause macroeconomic variables & ICT infrastructure and vice versa. H7A, B : Research and development expenditure Granger causes economic growth and vice versa. H8A, B : Research and development expenditure Granger causes macroeconomic variables & ICT infrastructure and vice versa. H9A, B : Researchers in research and development activities Granger cause economic growth and vice versa. H10A, B : Researchers in research and development activities Granger cause macroeconomic variables & ICT infrastructure and vice versa. H11A, B : Macroeconomic variables & ICT infrastructure Granger cause economic growth and vice versa. Highlights: We use a number of proxy variables to measure innovation. We examine the nexus between innovation, growth, and other variables. We utilize data from 32 high-income OECD countries between 1970 and 2016. There is evidence of a long-run equilibrium relationship between the variables. We also uncover a number of causal relationships among the variables.