Elusive Quest for Growth: Is innovation engine of growth?
-
Upload
rhea-farrell -
Category
Documents
-
view
33 -
download
0
description
Transcript of Elusive Quest for Growth: Is innovation engine of growth?
![Page 1: Elusive Quest for Growth: Is innovation engine of growth?](https://reader035.fdocuments.in/reader035/viewer/2022070402/56813861550346895da01090/html5/thumbnails/1.jpg)
Elusive Quest for Growth:
Is innovation engine of growth?
Motoo Kusakabe,
Senior Counselor to the President
EBRD
![Page 2: Elusive Quest for Growth: Is innovation engine of growth?](https://reader035.fdocuments.in/reader035/viewer/2022070402/56813861550346895da01090/html5/thumbnails/2.jpg)
Goal of my Presentation• Has determinant of growth changed as
economy becomes “global knowledge economy”?
• Did such change take place only for higher income countries? Or the changes took place also in lower-income countries?
![Page 3: Elusive Quest for Growth: Is innovation engine of growth?](https://reader035.fdocuments.in/reader035/viewer/2022070402/56813861550346895da01090/html5/thumbnails/3.jpg)
Has the Poverty reduced?• Extreme Poverty Head-Count (less than $1
a day)– 1981; 166 million people– 2001; 108 million (35% reduction)
• Reduction is mainly in East Asia and South Asia
• Sub-Saharan Africa, CIS; poverty increased• Latin America; almost no reduction
![Page 4: Elusive Quest for Growth: Is innovation engine of growth?](https://reader035.fdocuments.in/reader035/viewer/2022070402/56813861550346895da01090/html5/thumbnails/4.jpg)
020406080
100120140160180
East Asia
Europe & Central Asia
Latin America
Middle East & N
orth Africa
South AsiaSub-Saharan A
frica
World
19812001
![Page 5: Elusive Quest for Growth: Is innovation engine of growth?](https://reader035.fdocuments.in/reader035/viewer/2022070402/56813861550346895da01090/html5/thumbnails/5.jpg)
What countries grew most rapidly?Highest Growth Countries 23 years
China 8.23%
Korea, Rep. 5.97%
Ireland 4.70%
Thailand 4.66%
Botswana 4.63%
Mauritius 4.35%
Singapore 3.99%
India 3.69%
Hong Kong, China 3.61%
Malaysia 3.43%
![Page 6: Elusive Quest for Growth: Is innovation engine of growth?](https://reader035.fdocuments.in/reader035/viewer/2022070402/56813861550346895da01090/html5/thumbnails/6.jpg)
“Elusive quest” for the growth:Economists’ thoughts on growth
1. Investment & Savings; 50’s & 60’s
2. Trade and Export Performance ; 70’s
3. Macro/Structural Policies; 80’s & 90’s
4. Human Capital; 90’s
5. Governance, Investment climate; 2000’s
6. Innovation, Entrepreneurship, ICT
![Page 7: Elusive Quest for Growth: Is innovation engine of growth?](https://reader035.fdocuments.in/reader035/viewer/2022070402/56813861550346895da01090/html5/thumbnails/7.jpg)
Orthodox view on economic growth:1. Neo-classical view plus “growth
regression”
2. GDP growth rate is regressed by various indicators cross country
3. Identify “Robust” explanatory variables• Robustness means significant correlation at
5% levels and having the right sign, regardless of other control variables
![Page 8: Elusive Quest for Growth: Is innovation engine of growth?](https://reader035.fdocuments.in/reader035/viewer/2022070402/56813861550346895da01090/html5/thumbnails/8.jpg)
Four “Robust Factors” of growth• Studies identified Four Robust Factors of
Growth: 1. Investment / GDP Ratio 2. Export / GDP ratio or index of “trade openness” 3. Governance Index4. Initial GDP per capita
• Most of other indicators are “fragile” in explaining growth– Education, financial, macro, innovation,etc
![Page 9: Elusive Quest for Growth: Is innovation engine of growth?](https://reader035.fdocuments.in/reader035/viewer/2022070402/56813861550346895da01090/html5/thumbnails/9.jpg)
Traditional View on Growth:Three stage of development1. Basic economic governance (Lower Income
Countries)– Governance, Primary education, financial sector,
2. Export-led Growth (Higher Income Countries)– Export and FDI promotion– Investment in physical capital– Secondary Education
3. “Innovative” Technology-led Growth (Advanced Countries)
– Innovation, R&D, ICT– Tertiary Education
![Page 10: Elusive Quest for Growth: Is innovation engine of growth?](https://reader035.fdocuments.in/reader035/viewer/2022070402/56813861550346895da01090/html5/thumbnails/10.jpg)
Is Governance Engine of Growth?
• Governance is considered as an important determinant for growth.
• How is the empirical evidence?
![Page 11: Elusive Quest for Growth: Is innovation engine of growth?](https://reader035.fdocuments.in/reader035/viewer/2022070402/56813861550346895da01090/html5/thumbnails/11.jpg)
High correlations, if we take simple correlation• Correlation between governance indicators (2004) and
growth rate during past 23 years
0.00%10.00%20.00%30.00%40.00%50.00%60.00%70.00%80.00%
VoicePol. Stability
Gov. Effective
Reg. Quality
Rule of Law
Corruption
LowerHigher
![Page 12: Elusive Quest for Growth: Is innovation engine of growth?](https://reader035.fdocuments.in/reader035/viewer/2022070402/56813861550346895da01090/html5/thumbnails/12.jpg)
Governance had a smaller or negative impact on growth in the next decade• Correlation between governance indicators in 90s and
economic growth in 2000’s
-20%-15%-10%-5%0%5%
10%15%20%25%
VoiceRule of Law
Gov. Effective.
Regulatory
Corruption
LowerHigher
![Page 13: Elusive Quest for Growth: Is innovation engine of growth?](https://reader035.fdocuments.in/reader035/viewer/2022070402/56813861550346895da01090/html5/thumbnails/13.jpg)
Higher growth produces better governance later• Correlations between Per capita GDP growth rates in 90’s
Governance Indicators in 2000’s and
0%
5%
10%
15%
20%
25%
30%
35%
VoiceRule of Law
Gov. Effective.
Regulatory
Corruption
LowerHigher
![Page 14: Elusive Quest for Growth: Is innovation engine of growth?](https://reader035.fdocuments.in/reader035/viewer/2022070402/56813861550346895da01090/html5/thumbnails/14.jpg)
Policy implicationIt is an over-expectation that governance can produce higher growth, particularly in lower income countriesIn higher income countries, competing for FDIs, governance becomes more important, but it has a relatively small impact on growth
![Page 15: Elusive Quest for Growth: Is innovation engine of growth?](https://reader035.fdocuments.in/reader035/viewer/2022070402/56813861550346895da01090/html5/thumbnails/15.jpg)
Is Saving/investment an engine of growth?
• Economist, like Rostow, thought that investment decides the economic growth and lack of saving in developing countries is the source of slow growth.
• Role of International aid was thought to fill the gap between necessary investment and actual domestic savings
![Page 16: Elusive Quest for Growth: Is innovation engine of growth?](https://reader035.fdocuments.in/reader035/viewer/2022070402/56813861550346895da01090/html5/thumbnails/16.jpg)
Traditional view on saving & investment• Increase domestic savings and domestic
investment & FDIs is most important• Financial Gap approach: if the domestic
saving is short of covering investment needs, rely on foreign aid and foreign borrowing to invest
• International aid is focused on large infrastructure projects
![Page 17: Elusive Quest for Growth: Is innovation engine of growth?](https://reader035.fdocuments.in/reader035/viewer/2022070402/56813861550346895da01090/html5/thumbnails/17.jpg)
If we look at more carefully the causality,
• To examine the “causality”, correlation of saving and investment in one decade on the economic growth of the next decades are calculated.
![Page 18: Elusive Quest for Growth: Is innovation engine of growth?](https://reader035.fdocuments.in/reader035/viewer/2022070402/56813861550346895da01090/html5/thumbnails/18.jpg)
Savings have a negative correlation with next decades’ growth
-60%-50%-40%-30%-20%-10%
0%10%20%30%
60s to70s
70s to 80s
80s to 90s
90s to 00sLowerHigher
![Page 19: Elusive Quest for Growth: Is innovation engine of growth?](https://reader035.fdocuments.in/reader035/viewer/2022070402/56813861550346895da01090/html5/thumbnails/19.jpg)
Growth has a positive impact on savings in succeeding decades• Correlation between GDP per capita growth rates &
Gross Domestic Saving Ratio in the succeeding decades
-20.00%
-10.00%
0.00%
10.00%
20.00%
30.00%
40.00%
60s to70s 70s to 80s 80s to 90s 90s to 00s
LowerHigher
![Page 20: Elusive Quest for Growth: Is innovation engine of growth?](https://reader035.fdocuments.in/reader035/viewer/2022070402/56813861550346895da01090/html5/thumbnails/20.jpg)
Investment has negligible correlation with growth after 70s
-20%
-10%
0%
10%
20%
30%
40%
50%
60s to70s 70s to 80s 80s to 90s 90s to 00s
LowerHigher
![Page 21: Elusive Quest for Growth: Is innovation engine of growth?](https://reader035.fdocuments.in/reader035/viewer/2022070402/56813861550346895da01090/html5/thumbnails/21.jpg)
Rather growth causes higher investment in the succeeding decades
-20.00%
-10.00%0.00%
10.00%20.00%30.00%40.00%50.00%60.00%
60s to70s
70s to 80s
80s to 90s
90s to 00s
LowerHigher
![Page 22: Elusive Quest for Growth: Is innovation engine of growth?](https://reader035.fdocuments.in/reader035/viewer/2022070402/56813861550346895da01090/html5/thumbnails/22.jpg)
Savings & Investment:Policy implication• Increase in savings & investment does not
automatically bring about higher growth
• More often higher investment in inefficient projects through external borrowing caused problem
• Higher economic growth will increase the savings & investment
![Page 23: Elusive Quest for Growth: Is innovation engine of growth?](https://reader035.fdocuments.in/reader035/viewer/2022070402/56813861550346895da01090/html5/thumbnails/23.jpg)
Is Macro/Structural reform an engine of growth?
Bad macro/structural policies were considered to be the cause of slow economic growth
World Bank /IMF launched the “structural adjustment” approach in 80s. What is its relevance to economic growth?
![Page 24: Elusive Quest for Growth: Is innovation engine of growth?](https://reader035.fdocuments.in/reader035/viewer/2022070402/56813861550346895da01090/html5/thumbnails/24.jpg)
Inflation has a strong negative impact on growth in the next decades
• Correlations between inflation rate (CPI) and per capita GDP growth rates in the succeeding decades
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
LowerHigher
![Page 25: Elusive Quest for Growth: Is innovation engine of growth?](https://reader035.fdocuments.in/reader035/viewer/2022070402/56813861550346895da01090/html5/thumbnails/25.jpg)
Government consumptions has a mixed results on growth?Correlation between general government final consumption (GDP
ratio) and per capita GDP growth in the succeeding decades
-20.00%
-10.00%
0.00%
10.00%
20.00%
30.00%
40.00%
60s to70s
70s to 80s
80s to 90s
90s to 00s
LowerHigher
![Page 26: Elusive Quest for Growth: Is innovation engine of growth?](https://reader035.fdocuments.in/reader035/viewer/2022070402/56813861550346895da01090/html5/thumbnails/26.jpg)
Is Export an engine of growth?
Structural adjustment approach also encouraged open trade policy. Many countries promoted export, particularly hi-tech export.How effective were such policies?
![Page 27: Elusive Quest for Growth: Is innovation engine of growth?](https://reader035.fdocuments.in/reader035/viewer/2022070402/56813861550346895da01090/html5/thumbnails/27.jpg)
Strong correlation between export to growth• Correlations between the increase of export share in GDP and
growth in the next decades
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
60s to70s
70s to 80s
80s to 90s
90s to 00s
LowerHigher
![Page 28: Elusive Quest for Growth: Is innovation engine of growth?](https://reader035.fdocuments.in/reader035/viewer/2022070402/56813861550346895da01090/html5/thumbnails/28.jpg)
What factors explain the high export growth?IT Export performance
• 1. China 13.7% OO• 2. Korea 12.5% OOO• 3. Thailand 11.5% OO• 4. Ireland 11.0% OOOO• 5. Malaysia 10.8% OOO• 6. Hong Kong 10.6% O• 7. Bangladesh 10.0%• 8. Mexico 10.0% OO• 9. India 9.1%• 10. Syria 8.8%
![Page 29: Elusive Quest for Growth: Is innovation engine of growth?](https://reader035.fdocuments.in/reader035/viewer/2022070402/56813861550346895da01090/html5/thumbnails/29.jpg)
Foreign Direct Investment has a strong impact on growth in higher income countries
-20%-10%
0%10%20%30%40%50%60%
70s to 80s
80s to 90s
90s to 00s
LowerHigher
• Correlations between Gross Foreign Direct Investment (% of GDP) and GDP per capita growth rate in the succeeding decades
![Page 30: Elusive Quest for Growth: Is innovation engine of growth?](https://reader035.fdocuments.in/reader035/viewer/2022070402/56813861550346895da01090/html5/thumbnails/30.jpg)
Export: Policy implication• Export is the most important growth
determinant both in lower & higher income countries
• Growth of Export/GDP is the good measure of efficiency & competitiveness of the economy
• Export growth is strongly related to high-tech, ICT related export
![Page 31: Elusive Quest for Growth: Is innovation engine of growth?](https://reader035.fdocuments.in/reader035/viewer/2022070402/56813861550346895da01090/html5/thumbnails/31.jpg)
Is Education an engine of Growth?
Education was seen as the most important determinant for growth. What is the best strategy for education?
![Page 32: Elusive Quest for Growth: Is innovation engine of growth?](https://reader035.fdocuments.in/reader035/viewer/2022070402/56813861550346895da01090/html5/thumbnails/32.jpg)
Primary education had a strong impact on growth• Correlations between School Enrollment, Primary (% net) to the per
capita GDP growth rates in the succeeding decades
-10%
0%
10%
20%
30%
40%
50%
60%
70s to 80s 80s to 90s 90s to 00s
LowerHigher
![Page 33: Elusive Quest for Growth: Is innovation engine of growth?](https://reader035.fdocuments.in/reader035/viewer/2022070402/56813861550346895da01090/html5/thumbnails/33.jpg)
Secondary education has increased impact on growth• Correlations between School Enrollment, Secondary (Net) and Per
capita GDP growth rates in the succeeding decades
0%
10%
20%
30%
40%
50%
60%
70s to 80s 80s to 90s 90s to 00s
LowerHigher
![Page 34: Elusive Quest for Growth: Is innovation engine of growth?](https://reader035.fdocuments.in/reader035/viewer/2022070402/56813861550346895da01090/html5/thumbnails/34.jpg)
Tertiary education had a mixed impact on growth• Correlations between School Enrollment, Tertiary, (gross)
to Per capita DGP growth rates in the succeeding decades
-50%-40%
-30%-20%
-10%0%
10%20%30%
40%50%
70s to 80s 80s to 90s 90s to 00s
LowerHigher
![Page 35: Elusive Quest for Growth: Is innovation engine of growth?](https://reader035.fdocuments.in/reader035/viewer/2022070402/56813861550346895da01090/html5/thumbnails/35.jpg)
Policy implications• Primary education has a strong growth
impact in lower income countries• Secondary education has a strong impact on
growth in higher income countries and more recently in lower income countries
• Tertiary education used to be a negative correlation with growth, but it becomes important recent decades even in lower income countries
![Page 36: Elusive Quest for Growth: Is innovation engine of growth?](https://reader035.fdocuments.in/reader035/viewer/2022070402/56813861550346895da01090/html5/thumbnails/36.jpg)
Is ICT Engine of Growth?
Taiwan, Korea, Singapore, Ireland, India, China achieved a high growth through ICT ICT was seen by many economists as a major engine for growth
![Page 37: Elusive Quest for Growth: Is innovation engine of growth?](https://reader035.fdocuments.in/reader035/viewer/2022070402/56813861550346895da01090/html5/thumbnails/37.jpg)
Telephone became a strong engine of growth in lower income countries• Correlations between Telephone mainlines (per 1000 people) and Per
capita GDP growth rates in the succeeding decades
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
70s to 80s 80s to 90s 90s to 00s
LowerHigher
![Page 38: Elusive Quest for Growth: Is innovation engine of growth?](https://reader035.fdocuments.in/reader035/viewer/2022070402/56813861550346895da01090/html5/thumbnails/38.jpg)
Is Innovation Engine of Growth?
•Innovation needs a R&D process to produce new products and processes• Is such research capability necessary for developing countries?• Such innovation actually lead to higher growth for these countries?
![Page 39: Elusive Quest for Growth: Is innovation engine of growth?](https://reader035.fdocuments.in/reader035/viewer/2022070402/56813861550346895da01090/html5/thumbnails/39.jpg)
R&D capacity do have a strong impact on growth• Correlations between Innovation-related indicators in 1990s and Per
capita GDP growth in 2000s
-20%-10%
0%10%20%30%40%50%60%
R&DResearcher
Technician
LowerHigher
![Page 40: Elusive Quest for Growth: Is innovation engine of growth?](https://reader035.fdocuments.in/reader035/viewer/2022070402/56813861550346895da01090/html5/thumbnails/40.jpg)
Patent & Science Articles matter for growth• Even in Lower-income countries, patents and scientific journal
articles (in 90s) are strongly correlated to growth in 2000s
-10%-5%0%5%
10%15%20%25%30%35%40%45%
Patents J ournal
LowerHigher
![Page 41: Elusive Quest for Growth: Is innovation engine of growth?](https://reader035.fdocuments.in/reader035/viewer/2022070402/56813861550346895da01090/html5/thumbnails/41.jpg)
Implications:
Growth factors has changed from physical capital to knowledge capital, even for lower income countries
![Page 42: Elusive Quest for Growth: Is innovation engine of growth?](https://reader035.fdocuments.in/reader035/viewer/2022070402/56813861550346895da01090/html5/thumbnails/42.jpg)
What is the change in growth factors?• Globalization of the world economy
– Traditional three stage development pattern is no longer feasible
• Even lower income countries must compete in “knowledge economy”– Positive export promotion strategy to position
in growing market– Investment in higher education– Investment in R&D and scientific staff
![Page 43: Elusive Quest for Growth: Is innovation engine of growth?](https://reader035.fdocuments.in/reader035/viewer/2022070402/56813861550346895da01090/html5/thumbnails/43.jpg)
National Innovation System• Creating a “National Innovation System” is
vital for the growth in competing in global knowledge economy
• Asian type innovation system is still very relevant for developing countries– Government role– Universities’ role– Highly trained workforce
![Page 44: Elusive Quest for Growth: Is innovation engine of growth?](https://reader035.fdocuments.in/reader035/viewer/2022070402/56813861550346895da01090/html5/thumbnails/44.jpg)
New direction of development cooperation• Creation of a National Innovation System
– Science & Technology policies– University reform– ICT strategy– Entrepreneurship support
• Asian experience is more relevant– Japan, Korea, Taiwan, Malaysia, Singapore– Different strategies but in the same direction
![Page 45: Elusive Quest for Growth: Is innovation engine of growth?](https://reader035.fdocuments.in/reader035/viewer/2022070402/56813861550346895da01090/html5/thumbnails/45.jpg)
Thank you !!• Contact: [email protected]
• Website: www.netgrowth.com
open content, knowledge sharing website for ICT strategy