Knowledge and Economic Growth: A Dynamic Panel Data Analysis for OECD Countries

Abstract

This paper aims to investigate the role of knowledge in the economic growth convergence of the OECD member countries during the 1995-2011 period, by utilizing the production function approach. In our augmented production function framework, in addition to human capital, we consider other important channels of knowledge (R&D, trade and ICTs) to understand how knowledge contributes to the growth performance and growth convergence of the OECD countries. Furthermore, in contrast to most of the existing studies which used traditional panel data analysis, this study utilizes dynamic panel data techniques. This approach enables us to utilize the long-run information in the data and hence gives us the possibility to analyze the impact of knowledge indicators on economic growth by focusing on equilibrium relations over a longer time horizon. The empirical results suggest a positive impact of knowledge indicators on the economic growth performances of OECD countries and that there is convergence to a common long-run equilibrium in OECD.