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

Author

Listed:
  • Al Raee, Mueid

    (UNU-MERIT, and Maastricht University)

  • Ritzen, Jo

    (UNU-MERIT, and Maastricht University)

  • Crombrugghe, Denis de

    (School of Business and Economics, Maastricht University)

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.

Suggested Citation

  • Al Raee, Mueid & Ritzen, Jo & Crombrugghe, Denis de, 2017. "Innovation policy & labour productivity growth: Education, research & development, government effectiveness and business policy," MERIT Working Papers 2017-019, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    • Handle: RePEc:unm:unumer:2017019
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    References listed on IDEAS

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    More about this item

    Keywords

    Innovation policy; labour productivity growth; technological change; government effectiveness; developing countries; Arabian Gulf countries.;
    All these keywords.

    JEL classification:

    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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