Speed of Navigation vis-a-vis Quality of Innovation as Sources of Progression towards Steady State Equilibrium: Insights and Inferences

Abstract

This study formally and theoretically juxtaposes `speed of navigation' of the general equilibrium growth path (equivalently, a `low-high' innovation system), and `quality of innovations' (equivalently, a `top-down' innovation system) as alternate strategies for minimization of the time it takes for a country to arrive at its general equilibrium steady state growth phase. Formal theoretical predictions show that, whereas the speed of navigation strategy has feasibility of outperforming the quality of innovations strategy, superior performance at minimization of time to steady state is feasible only in presence of either of errors of implementation of the top-down innovation system, or incapacity of an economy at generation of high quality innovations. In absence of stated two factors, the quality of innovations strategy outperforms the speed of navigation strategy for minimization of the time it takes for a country to arrive at its general equilibrium steady state growth phase. Empirical findings provide corroboration for study findings, provide evidence that whereas the speed of navigation strategy generates a linear approach, the quality of innovations strategy generates a weakly convex approach to the general equilibrium steady state growth phase. Quality of elementary education is `poster boy' for the quality of innovations strategy. Simultaneously, size of stock markets and fixed capital formation are poster boys for the `speed of navigation' strategy.