A Spatiotemporal Approach to Measure Impact of Factors of Production on Innovations

Abstract

Measuring innovations is momentous in research work on industrial location, regional economic planning and industrial profits. However, fewer studies have considered spatiotemporal factors for analysing the impact of factors of production on innovation till this date. Present study is therefore an attempt to fill this void by developing a model relating to factors of production effects on industrial innovation with continuous spatial locations for Pakistan. Our methodology is consistent with the approach espoused by Desmet and Hansberg (2014). The model assumes that labour and capital affects the innovation at each available location during the production process. This model has also incorporated spill over-effects whichdeclines with the upsurge in distance. Migration of labour act as the basic element for the speculation of higher-level of innovation. Successively, simulation of the model for a developing economy like Pakistan, we conclude that the share of capital to innovation is much higher relative to the share of labour, but comparatively spill over-effects of capital is susceptible to the increase in distance. Our study has theoretical contribution in the sense that we have improved the existing work of Desmet and Hansberg (2014), where labour was considered as the only source of innovation and capital, as an endogenous variable, was neglected.