Knowledge Economy and the Economic Performance of African Countries: A Seemingly Unrelated and Recursive Approach

Knowledge has emerged as a potentially key driver of economic growth and competitiveness, thereby attracting more attention in Africa than before because it is crucial to understand the factors and policies that influence the knowledge economy (KE) process and economic performance. This study examines the existence and nature of the relationship between the KE and economic performance in 46 African countries. Assuming implicitly that the conditions leading to a KE include a modern Information and Communication Technologies infrastructure, a skilled labor force, an effective innovation system, and a proper institutional framework, we model technology as a key element of KE through which human capital affects both KE and economic performance. We then estimate the baseline model and find that Ordinary Least Squares results illuminate the existence of a relationship between the KE and economic performance. To check for the nature of the relationship and the robustness of the results, we estimate a seemingly unrelated regression equation (SURE) model and a recursive simultaneous equation model. Both models firmly establish the existence of a dynamic relationship between KE and economic performance. We conclude that African countries should first strengthen the KE components to prevent them from negatively affecting economic performance. We also conclude that for these countries, the transformation from resource-based into KE-led economies requires strong economic performance to put in motion the full force of the KE for even stronger economic performance.