Innovation policy & labour productivity growth: Education, research & development, government effectiveness and business policy

Mueid Al Raee, Jo Ritzen () and Denis de Crombrugghe ()
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Mueid Al Raee: UNU-MERIT, and Maastricht University
Jo Ritzen: UNU-MERIT, and Maastricht University
Denis de Crombrugghe: School of Business and Economics, Maastricht University

No 2017-019, MERIT Working Papers from United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT)

Abstract: This paper examines the relationship between labour productivity growth in non-traditional sectors and "innovation policy" for a cross-section of countries. Innovation policy is characterised by investments in tertiary education and research and development as a percentage of Gross Domestic Product (GDP), the freedom in the business environment, as well as overall government effectiveness. Our results confirm the economic convergence between richer and poorer countries. We could show a significant positive effect of the interaction between government effectiveness and government expenditures in tertiary education as a percent of GDP on labour productivity growth in non-traditional sectors. Also, for developing countries, a positive and significant relationship between the growth variable and effective research and development expenditures was observed. We could not uncover a relationship between other innovation policies and labour productivity growth. Non-traditional sector labour productivity growth in the oil-rich Arabian Gulf countries was observed to be consistently slower than Western countries. Higher oil prices appear to crowd out innovation in oil-rich countries while stimulating innovation in oil-importing countries.

Keywords: Innovation policy; labour productivity growth; technological change; government effectiveness; developing countries; Arabian Gulf countries. (search for similar items in EconPapers)
JEL-codes: O38 O43 O47 (search for similar items in EconPapers)
Date: 2017-04-04
New Economics Papers: this item is included in nep-cse, nep-eff, nep-ene and nep-ino
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:unm:unumer:2017019

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