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Revisiting the effects of innovation on growth: a threshold analysis

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  • M. Aristizabal-Ramirez
  • G. Canavire-Bacarreza
  • F. Rios-Avila

Abstract

Since Schumpeter's (1934) seminal work, the existing literature has examined the relationship between innovation and economic growth, arguing for a strictly positive relationship. The recent literature suggests that this relationship might be non-linear. Low levels of innovation will not affect economic growth; yet, when a certain threshold is reached, innovation significantly promotes economic growth. Using panel data information for 147 countries from 2006 to 2012, we employ threshold regressions � la Hansen (1999) to test the hypothesis of a non-linear relationship between innovation and growth. We find evidence that the relationship between innovation and growth is not linear and that only high levels of innovation increase economic growth. The results tend to be stronger when investment and public expenditure are present, suggesting that the quality of institutions is important.

Suggested Citation

  • M. Aristizabal-Ramirez & G. Canavire-Bacarreza & F. Rios-Avila, 2015. "Revisiting the effects of innovation on growth: a threshold analysis," Applied Economics Letters, Taylor & Francis Journals, vol. 22(18), pages 1474-1479, December.
    • Handle: RePEc:taf:apeclt:v:22:y:2015:i:18:p:1474-1479
    DOI: 10.1080/13504851.2015.1039699
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    Cited by:

    1. Özgür ERSİN & Ayfer USTABAŞ & Tuğçe ACAR, 2022. "The Nonlinear Effects of High Technology Exports, R&D and Patents on Economic Growth: A Panel Threshold Approach to 35 OECD Countries," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(1), pages 26-44, April.
    2. Maria Aristizabal-Ramirez & Maria Camila Botero-Franco & Gustavo Canavire-Bacarreza, 2017. "Does Financial Development Promote Innovation in Developing Economies? An Empirical Analysis," Review of Development Economics, Wiley Blackwell, vol. 21(3), pages 475-496, August.
    3. Manzoor Ahmad & Jianghuai Zheng, 2023. "The Cyclical and Nonlinear Impact of R&D and Innovation Activities on Economic Growth in OECD Economies: a New Perspective," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 14(1), pages 544-593, March.
    4. Hao, Xiaoli & Deng, Feng, 2019. "The marginal and double threshold effects of regional innovation on energy consumption structure: Evidence from resource-based regions in China," Energy Policy, Elsevier, vol. 131(C), pages 144-154.
    5. Li, Guangchen & Wei, Weixian, 2021. "Financial development, openness, innovation, carbon emissions, and economic growth in China," Energy Economics, Elsevier, vol. 97(C).
    6. Forson, Joseph Ato & Opoku, Rosemary Afrakomah & Peng, Zhen, 2017. "Innovation, Institutions and Economic Growth in Sub-Sahara Africa – an IV Estimation of a Panel Threshold Model," MPRA Paper 103063, University Library of Munich, Germany, revised 15 Mar 2018.

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