The innovation- growth link in OECD countries: Could other macroeconomic variables matter?

Rudra P. Pradhan, Mak Arvin, Sahar Bahmani and Sara E. Bennett

Technology in Society, 2017, vol. 51, issue C, 113-123

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.

Keywords: Innovation; Economic growth; ICT infrastructure; Other macroeconomic variables; Panel cointegration; Granger causality (search for similar items in EconPapers)
JEL-codes: L96 O32 O33 O43 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (26)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:teinso:v:51:y:2017:i:c:p:113-123

DOI: 10.1016/j.techsoc.2017.08.003

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