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No. 91. THE KNOWLEDGE-BASED ECONOMY, CONVERGENCE AND ECONOMIC GROWTH: EVIDENCE FROM THE EUROPEAN UNION

Published in DISCUSSION PAPERS

S. Karagiannis. 2007.

 

The aim of this study is to estimate the effect that the knowledge-based economy objective may have on economic growth; which is the ultimate objective of the EU’s Lisbon Strategy (LS). In particular we are interested in identifying whether policies and investments linked with the transition to a knowledge-based economy (R&D effort, quality of human resources, innovation capacity, IT diffusion, access to finance & information society) are related to higher economic growth. In order to approach the above research hypothesis, a growth equation is used, based on Barro & Sala-i-Martin (1995), for the 1990-2003 period. It includes a panel data set consisting of the annual growth rates of GDP per capita (PPS) for the 15 EU member-states and a group of indicators that define the knowledge-based economy. The GMM-DIFF Arellano-Bond estimator is applied in this dynamic panel data model. The existence of absolute convergence is estimated as well, as are the effects and significance that indicators of the knowledge-based policy have in the growth equation. Growth empirics were estimated regarding the full sample, as well as two sub-groups consisting of high and low-income member-states. Results suggest that R&D expenditure originating from abroad affect significantly and positive GDP rates, while human capital educational characteristics (youth educational attainment levels) and investments in ICT (IT equipment) also affect significantly and positive GDP rates.

 

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