The theoretical basis for determining the innovative contribution to economic growth

Abstract

It is proposed to expand the production function of Cobb-Douglas through the inclusion of, in addition to scientific and technical progress, the cost of labor and capital of innovative factors, namely: the volume of expenses for scientific and technical work, the volume of financing of innovative activities, the volume of innovative products sold, the volume of innovative products in commodity export. An analytical universal approach has been developed to identify the modified Cobb-Douglas production function, which does not require long time series of variables, allows accurate display of output or GDP, and provides a causal functional (non-statistical) relationship between input and output data. Moreover, the definition of the components of the aggregate supply function is formalized, and all the elasticity and capital utilization coefficients are functions of time in each separate period, and not average constant values, which indicates the dynamic nature of the dependencies. Further application of the Solow residual method to the modified Cobb-Douglas function taking into account innovative factors allows us to determine the contribution to the economic growth of each individual factor, in particular the innovative contribution at the country, region and economic activity levels, which indicates the universality of the approach.