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A knowledge economy approach in empirical growth models for the Nordic countries

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Abstract

We estimate, employing a “knowledge economy” approach, the steady state growth rate for the Nordic countries. An endogenous growth framework is developed, in which total factor productivity is a function of human capital (measured by average years of education), trade openness, research and development, and investment ratio. We identify the key variables having a significant level and growth effects within this framework. We find that education plays an important role on the long-run growth rates of Sweden, Norway, and Denmark; trade openness, instead, has growth effects in Sweden, Finland, and Iceland. The investment ratio is able to explain patterns of growth only in Finland. Surprisingly, research and development has no level or growth effects in any of the Nordic countries. This may be attributable to the fact that research and development are driven by openness and education. Policy measures are identified to improve the long-run growth rates for these countries.

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  • Arusha Cooray & Marcella Lucchetta & Antonio Paradiso, 2013. "A knowledge economy approach in empirical growth models for the Nordic countries," Economics Working Papers wp13-06, School of Economics, University of Wollongong, NSW, Australia.
    • Handle: RePEc:uow:depec1:wp13-06
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    Keywords

    Endogenous growth models; Trade openness; human capital; investment ratio; Steady state growth rate; Nordic countries;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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