Innovation, Economic Growth, and Inequalities: A Panel Dynamic Threshold Analysis for Dynamic Economies

Sabreen Khan () and Dil Pazir ()
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Sabreen Khan: Department of Economics, Baba Ghulam Shah Badshah University (Rajouri), Jammu and Kashmir, India
Dil Pazir: Department of Economics, Baba Ghulam Shah Badshah University (Rajouri), Jammu and Kashmir, India

Annals of Financial Economics (AFE), 2023, vol. 18, issue 03, 1-29

Abstract: This study reinforces the minimal empirical work on the nonlinear relationship between innovative activities, economic growth, and income distribution. Meanwhile, this study assesses panel data of 40 developing economies from 1996 to 2020, wielding the newly developed threshold model by Seo and Shin (2016). Firstly, the empirical findings hold that there exists a nonlinear relationship between the variables. So, by regressing Innovation on economic growth, this study acquires a threshold value of 0.36% of R&D. Hence, indicating above the threshold value of 0.36, the economic growth will revamp. Secondly, regressing R&D on GINI, this study obtains a threshold value of 0.27% of R&D. So, above the threshold value of 0.25, the income inequality will topple down. In contrast, below the threshold level of Innovation will cause both economic growth and income inequality to exacerbate. All in all, the empirical findings of this study suggest that it is plausible to argue that governments and policymakers in developing economies should lavish more on Innovation because higher innovation activities result in inclusive growth.

Keywords: Innovation; economic growth; income inequality; nonlinear analysis; panel dynamic threshold model; developing economies (search for similar items in EconPapers)
JEL-codes: C1 O1 O2 O3 O4 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1142/S2010495223500045

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