Voxi Heinrich S. Amavilah

The Impact of Formal Institutions on Knowledge Economy

Using Kauffman, Kraay, and Mastruzzi governance indicators, this article analyzes the impact of formal institutions on the knowledge economy- by assessing how the enforcement of Intellectual Property Rights (IPRs) through good governance mechanisms affects the knowledge economy. The article also employs the World Bank’s four components of the knowledge economy index characteristic of its knowledge for development (K4D) framework. We estimate panel data models for 22 Middle East & North African and Sub-Sahara African countries over the period 1996-2010. The results show that for this group of countries the enforcement of IPR laws (treaties), although necessary, is not a sufficient condition for a knowledge economy. The results also suggest that other factors are more likely to determine the knowledge economies of these nations. Overall these findings have important implications for both policy and further research.

Knowledge of African Countries: Production and Value of Doctoral Dissertations

The notion that lack of knowledge undermines the economic performance of African countries is deeply and widely held to be true. Yet quantitative evidence for the basis of that truth is few and far in-between. This article first describes a conventional production function approach to the creation of knowledge of African countries in terms of a relative and indirect measure of the quantity of dissertations (D). Second, it assesses the imputed values of knowledge. In the first instance it finds that relative income (Y), population (N), openness (Z), and technical factors (A) are central to the production of knowledge of African countries. In the second instance, the imputed values of knowledge are positive, but of modest magnitude. The results recommend more investment in the production of knowledge of African countries, improved openness, and especially reduced opportunity cost of knowledge creation which now differs widely across countries, and averages 10.7%. For further research the results suggest that dissertations may be useful proxies for human capital in economic growth regressions.

German aid and trade versus Namibian GDP and labour productivity

This paper examines the effects of German foreign aid to, and net trade with, Namibia on Namibias recent (1985-95) economic performance. The analysis suggests significant benefits for Namibia from trade with and assistance from Germany. However, domestic capital is found to determine Namibian economic growth more than net trade with Germany and German foreign aid to Namibia, while the effect of German capital tends be larger than that of German aid. A need for direct foreign investment from Germany to Namibia is inferred. Two types of further investigations are required: a joint determination of economic growth, aid, trade and capital formation, and a disaggregation of German aid to Namibia with an analysis of its individual impacts compared with similar effects of aid from other donors.

Globalization, Peace & Stability, Governance, and Knowledge Economy

A previous analysis of the impact of formal institutions on the knowledge economy of 22 Middle-Eastern and Sub-Sahara African countries during the 1996-2010 time period concluded that formal institutions were necessary, but inadequate, determinants of the knowledge economy. To extend that study, this paper claims that globalization induces peace and stability, which affects governance and through governance the knowledge economy. The claim addresses one weakness of previous research that did not consider the effects on the knowledge economy of globalization. We model the proposition as a three-stage process in four hypotheses, and estimate each hypothesis using robust estimators that are capable of dealing with the usual statistical problems without sacrificing economic relevance and significance. The results indicate that globalization has varying effects on peace and stability, and peace and stability affect governance differently depending on what kind of globalization induces it. For instance, the effects on governance induced by globalization defined as trade are stronger than those resulting from globalization taken to be foreign direct investment. Hence, we conclude that foreign direct investment is not a powerful mechanism for stimulating and sustaining the knowledge economy in our sample of countries. However, since globalization-induced peace and stability have both positive and negative effects on governance simultaneously, we also conclude that while the prospect for knowledge economy in African countries is dim, it is still realistic and attainable as long as these countries continue to engage in the kind of globalization that does indeed induce peace and stability. We further conclude that there is a need for a sharper focus on economic and institutional governance than on general governance as one possible extension of this paper.

Economic Implications of Business Dynamics for KE-Associated Economic Growth and Inclusive Development in African Countries

This paper develops an empirically-relevant framework (a) to examine whether or not the African business environment hinders or promotes the knowledge economy (KE), (b) to determine how the KE which emerges from such an environment affects economic growth, and (c) how growth in turn relates to the ‘inclusive development’ of 53 African countries during the 1996-2010 time period. The framework provides a modest guide to policymaking about, and further research into, such relationships. We implement the framework by building a three-stage model and rationalizing it as five interrelated hypotheses. To allow greater concentration on the issues that are themselves already complex, our model is very simple, but clear. For example, we make neither an attempt to evaluate causality nor to test for it, even though we suspect the links to be multi-directional – opportunity costs are everywhere. Instead we focus on fundamental relationships between the dynamics of starting business and doing business as expressed in the state of KE, and through it to the inclusive development via the economic growth of those countries. Estimation results indicate that the dynamics of starting and doing business explain strongly a large part of variations in KE. The link between KE and economic growth exists, but it is weak, and we provide plausible reasons for such a result. Despite the weak association between KE and economic growth, KE-influenced growth plays a very important role in inclusive development. In fact, growth of this kind has stronger effects on inclusive development and by implication on poverty reduction, than some of conventional controls in this study such as FDI, foreign aid, and even private investment. There is clearly room for further research to improve the results, but just as clearly practical policy is best served by not neglecting the relationships examined in this paper.

Institutional Change and Economic Performance: An Off-the-Cuff Comment on Professors Daron Acemoglu, Simon Johnson and James Robinson's Three Papers

The three papers to which this comment is directed bring to vivid life the role of institutions in the economic performance of nations. The empirical examples the papers use illustrate specific institutional influences on at least two broad measures of economic performance: per capita income and urbanization. However, it is not clear (a) why similar changes led to dissimilar and often asymmetric outcomes, (b) how Atlantic trade produced progress for (Western) Europe early on, but not for other regions, and (c) how the growth of cities contributed to European trade while the urbanization phenomenon in general has tended to attract squalor living and inequality in many developing countries today. This paper comments on these and similar issues.

Linkages between Formal Institutions, ICT Adoption and Inclusive Human Development in Sub Saharan Africa

Using data for 49 African countries over the years spanning 2000-2012, and controlling for a wide range of factors, this study empirically assesses the effects of formal institutions on ICT adoption in developing countries. It deploys 2SLS and FE regression models, (a) to estimate what determines ICT adoption and (b) to trace how ICT adoption affects inclusive development. The results show that formal institutions affect ICT adoption in this group of countries, with government effectiveness having the largest positive effect and regulations the largest negative effect. Generally, formal institutions appear more important to ICT adoption in low income countries than middle income countries, whereas population and economic growth tend to constrain ICT adoption with low income countries more negatively affected than middle income countries. The results further demonstrate that ICT adoption affects development strongly, and that such effects are comparable to those of domestic credit and foreign direct investment. Ceteris paribus, external factors like foreign aid are more limiting to inclusive development than internal factors. This suggests that developing countries can enhance their ICT adoption for development by improving formal institutions and by strengthening domestic determinants of ICT adoption. Both represent opportunities for further research.

The Effects of Technology-as-Knowledge on the Economic Performance of Developing Countries: An Econometric Analysis using Annual Publications Data for Botswana, Namibia, and South Africa, 1976-2004

Extant literature indicates that technology, and by implication its underlying knowledge base, determines long-run economic performance. Absent from the literature with respect to developing countries are quantitative assessments of the nexus between technology as knowledge and economic performance. This paper imposes a simple production function on annual pooled observations on Botswana, Namibia, and South Africa over the 1976-2004 period to estimate the marginal impacts of technology as knowledge on economic performance. It finds that capital (k), openness to trade (τ), and even the share of government expenditure of GDP (G) among other factors, influence economic performance. However, the economic performance of countries like Botswana, Namibia, and South Africa depends largely on technology, technological change, and the basic knowledge that forms the foundation for both. For instance, measured as a homogenous “manna from heaven”, technology is the strongest determinant of real per capita income of the three nations. The strength of technology as a determinant of performance depends on the knowledge underpinnings of technology measured as the number of publications (Q, q). Both Q and q are strongly correlated with the countries’ performance. This suggests that the “social capability” and “technological congruence” of these countries are improving, and that developing countries like Botswana, Namibia, and South Africa gain from increased investment in knowledge-building activities including publishing. Obviously there is room for strengthening results, but this analysis has succeeded in producing a testable hypothesis.