Heterogeneous Effects of Frontier Technology Readiness on Economic Growth in Africa

Ofori, Isaac K. and Gbolonyo, Emmanuel Y. and Vezzulli, Andrea (2024): Heterogeneous Effects of Frontier Technology Readiness on Economic Growth in Africa. Forthcoming in:

Abstract

Despite the remarkable growth in frontier technology adoption (FTR) in the Global South, empirical evidence concerning their socioeconomic impacts in the context of Africa is hard to find. This study, therefore, employs macro data for a sample of 39 African countries to bridge three pressing gaps in the growth literature. First, we examine the impact of FTR on economic growth. Second, the study assesses whether FTR and egalitarian democracy synergistically enhance economic growth. Third, this study examines the heterogeneous effects of FTR across growth quantiles. Robust evidence, based on the dynamic system-GMM and the method of moments quantile regression, reveals the following: first, FTR promotes economic growth, but the effect is modest; second, egalitarian democracy amplifies the growth-enhancing impact of FTR, but only at higher thresholds of egalitarianism. Third, although FTR is growth-enhancing across all growth quantiles, the effect diminishes from the 1st to the 9th quantile. However, in the presence of egalitarian democracy, FTR significantly enhances growth across all growth quantiles from the 1st to the 9th. We conclude that progress in egalitarian democracy and investments for enhancing FTR are crucial for economic growth in Africa.

• Item Type: MPRA Paper
• Language: English
• Keywords: Africa; Economic growth; Democracy; Egalitarian democracy; Frontier technology readiness
• Subjects: O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights > O31 - Innovation and Invention: Processes and Incentives; O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights > O38 - Government Policy; O - Economic Development, Innovation, Technological Change, and Growth > O5 - Economywide Country Studies > O55 - Africa; P - Economic Systems > P4 - Other Economic Systems > P48 - Political Economy ; Legal Institutions ; Property Rights ; Natural Resources ; Energy ; Environment ; Regional Studies; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q0 - General > Q01 - Sustainable Development

References

Acemoglu, D. (2021). Harms of AI (No. w29247). National Bureau of Economic Research.

Acemoglu, D., Naidu, S., Restrepo, P., & Robinson, J. A. (2015). Democracy, redistribution, and inequality. In Handbook of income distribution (Vol. 2, pp. 1885-1966).

Acemoglu, D., & Robinson, J. A. (2012). Why Nations Fail: The Origins of Power, Prosperity, and Poverty. Crown Business.

Acemoglu, D., Naidu, S., Restrepo, P., & Robinson, J.A. (2014). Democracy Does Cause Growth. Journal of Political Economy, 127, 47 - 100.

Adeleye, B. N., Adedoyin, F., & Nathaniel, S. (2021). The criticality of ICT-trade nexus on economic and inclusive growth. Information Technology for Development, 27(2), 293-313.

Aghion, P. & Howitt, P. (1998). Capital accumulation and innovation as complementary factors in long-run growth. Journal of Economic Growth, 3, 111-130.

Aghion, P., Howitt, P., Brant-Collett, M., & García-Peñalosa, C. (1998). Endogenous growth theory. MIT Press.

Anakpo, G., & Oyenubi, A. (2022). Technological innovation and economic growth in Southern Africa: Application of panel dynamic OLS regression. Development Southern Africa, 39(4), 543-557.

Asongu, S. A., & Nwachukwu, J. C. (2016). Foreign aid and governance in Africa. International Review of Applied Economics, 30(1), 69-88.

Asongu, S. A., & le Roux, S. (2024). Governance, debt service, information technology and access to electricity in Africa. International Journal of Finance & Economics, 1-15.

Avenyo, E. K., Konte, M., & Mohnen, P. (2019). The employment impact of product innovations in Sub-Saharan Africa: Firm-level evidence. Research Policy, 48(9), 103806.

Ayamga, M., Akaba, S., & Nyaaba, A. A. (2021). Multifaceted applicability of drones: A review. Technological Forecasting and Social Change, 167, 120677.

Bara, A., Mugano, G., & Le Roux, P. (2016). Financial innovation and economic growth in the SADC. African Journal of Science, Technology, Innovation and Development, 8(5), 483-495

Barro, R. J. (1996). Democracy and growth. Journal of Economic Growth, 1, 1-27.

Binder, M., & Coad, A. (2011). From Average Joe’s happiness to Miserable Jane and Cheerful John: using quantile regressions to analyze the full subjective well-being distribution. Journal of Economic Behavior & Organization, 79(3), 275-290.

Block, F. L., & Keller, M. R. (2015). State of innovation: the US government’s role in technology development. Routledge.

Boamah, J., Adongo, F. A., Essieku, R., & Lewis Jr, J. A. (2018). Financial depth, gross fixed capital formation and economic growth: Empirical analysis of 18 Asian economies. International Journal of Scientific and Education Research, 2(04).

Brambor, T., Clark, W. R., & Golder, M. (2006). Understanding interaction models: Improving empirical analyses. Political Analysis, 14(1), 63-82.

Brynjolfsson, E., & McAfee, A. (2014). The second machine-age: Work, progress, and prosperity in a time of brilliant technologies. WW Norton & Company.

Canay, I. A. (2011). A simple approach to quantile regression for panel data. The Econometrics Journal, 14(3), 368-386.

Chang, C. C., & Mendy, M. (2012). Economic growth and openness in Africa: What is the empirical relationship? Applied Economics Letters, 19(18), 1903-1907.

Colagrossi, M., Rossignoli, D., & Maggioni, M. A. (2020). Does democracy cause growth? A meta-analysis (of 2000 regressions). European Journal of Political Economy, 61, 101824.

Collier, P., & Gunning, J. W. (1999). Why has Africa grown slowly? Journal of Economic Perspectives, 13(3), 3-22.

Coppedge, M., Gerring, J., Altman, D., Bernhard, M., Fish, S., Hicken, A., ... & Teorell, J. (2011). Conceptualizing and measuring Democracy: A new approach. Perspectives on Politics, 9(2), 247-267.

Diamond, L. (2008). The democratic rollback-the resurgence of the predatory state. Foreign Affairs, 87, 36.

Doucouliagos, H., & Ulubaşoğlu, M. A. (2008). Democracy and economic growth: a meta‐analysis. American Journal of Political Science, 52(1), 61-83.

Gao, W., & Su, C. (2020). Analysis on blockchain financial transaction under artificial neural network of deep learning. Journal of Computational and Applied Mathematics, 380, 112991.

Graetz, G., & Michaels, G. (2018). Robots at work. Review of Economics and Statistics, 100(5), 753-768.

Gyedu, S., Heng, T., Ntarmah, A. H., He, Y., & Frimppong, E. (2021). The impact of innovation on economic growth among G7 and BRICS countries: A GMM style panel vector autoregressive approach. Technological Forecasting and Social Change, 173, 121169.

Hasan, I., & Tucci, C. L. (2010). The innovation–economic growth nexus: Global evidence. Research Policy, 39(10), 1264-1276.

Hansen, L. P. (1982). Large sample properties of generalized method of moments estimators. Econometrica: Journal of the Econometric Society, 50(4), 1029-1054.

Ike, G. N., Usman, O., & Sarkodie, S. A. (2020). Testing the role of oil production in the environmental Kuznets curve of oil producing countries: New insights from Method of Moments Quantile Regression. Science of the Total Environment, 711, 135208.

International Energy Agency. (2022). Renewables 2022 Global Status Report. Retrieved from https://www.iea.org/reports/renewables-2022

Inglehart, R. (1997). Modernization, postmodernization and changing perceptions of risk. International Review of Sociology, 7(3), 449-459.

Jacob, J. A., & Osang, T. (2020). Democracy and growth: A dynamic panel data study. The Singapore Economic Review, 65(01), 41-80.

Jovanovic, Z., Hou, Z., Biswas, K., & Muthukkumarasamy, V. (2024). Robust integration of blockchain and explainable federated learning for automated credit scoring. Computer Networks, 243, 110303.

Keho, Y. (2017). The impact of trade openness on economic growth: The case of Cote d’Ivoire. Cogent Economics & Finance, 5(1), 1332820.

Khodaverdian, S. (2022). The African tragedy: the effect of democracy on economic growth. Empirical Economics, 62(3), 1147-1175.

Koenker, R. (2004). Quantile regression for longitudinal data. Journal of Multivariate Analysis, 91(1), 74-89.

Koenker, R., & Bassett Jr, G. (1978). Regression quantiles. Econometrica: Journal of the Econometric Society, 33-50.

Kripfganz, S. (2022). XTDPDGMM: Stata module to perform generalized method of moments estimation of linear dynamic panel data models.

Krotov, V. (2017). The Internet of Things and new business opportunities. Business Horizons, 60(6), 831-841.

Link, A. N., & Siegel, D. S. (2007). Innovation, entrepreneurship, and technological change. OUP Oxford.

Lipset, S. M. (1959). Some social requisites of Democracy: Economic development and political legitimacy1. American Political Science Review, 53(1), 69-105.

Lucas, R. E. (1988). On the Mechanics of Economic Development. Journal of Monetary Economics, 22(1), 3-42.

Machado, J. A., & Silva, J. S. (2019). Quantiles via moments. Journal of Econometrics, 213(1), 145-173.

Naughton, B. (2008). A political economy of China’s economic transition. China’s Great Economic Transformation, 10, 91-135.

Nelson, R. R. (1985). An evolutionary theory of economic change. Harvard University Press. Noman, A. (Ed.). (2012). Good growth and governance in Africa: Rethinking development strategies. Oxford University Press, USA.

North, D. C. (1990). Institutions, institutional change and economic performance. Cambridge University Press.

Nosier, S., & El-Karamani, A. (2018). The indirect effect of democracy on economic growth in the MENA region (1990–2015). Economies, 6(4), 61.

Okafor, G. (2017). The impact of political instability on the economic growth of ECOWAS member countries. Defence and Peace Economics, 28(2), 208-229.

Pollio, A. (2020). Making the Silicon Cape of Africa: Tales, theories and the narration of startup urbanism. Urban Studies, 57(13), 2715-2732.

Przeworski, A. (2000). Democracy and development: Political institutions and well-being in the world, 1950-1990 (No. 3). Cambridge University Press.

Puri, V., Nayyar, A., & Raja, L. (2017). Agriculture drones: A modern breakthrough in precision agriculture. Journal of Statistics and Management Systems, 20(4), 507-518.

Rodrik, D., Subramanian, A., & Trebbi, F. (2004). Institutions rule: the primacy of institutions over geography and integration in economic development. Journal of Economic Growth, 9, 131-165.

Roger, M., Shulin, L., & Sesay, B. (2022). ICT development, innovation diffusion and sustainable growth in sub-Saharan Africa. Sage Open, 12(4), 21582440221123894

Romer, P. M. (1990). Endogenous Technological Change. Journal of Political Economy, 98(5), S71-S102.

Romer, P. M. (1986). Increasing returns and long-run growth. Journal of Political Economy, 94(5), 1002-1037.

Roodman, D. (2009). How to do xtabond2: An introduction to difference and system GMM in Stata. The Stata Journal, 9(1), 86-136.

Schumpeter, J. A. (1942). The process of creative destruction. In Capitalism, socialism and Democracy, ed. J. Schumpeter, 81–86. New York: Harper (1962).

Schumpeter, J. (1934). The theory of economic development. Cambridge, MA: Harvard University Press.

Schumpeter, J. (2017). Theory of economic development (pp. 1-601). Duncker and Humblot.

Siddarth, D., Acemoglu, D., Allen, D., Crawford, K., Evans, J., Jordan, M., & Weyl, E. (2021). How AI fails us. arXiv preprint arXiv:2201.04200.

Sigman, R., & Lindberg, S. I. (2019). Democracy for all: Conceptualizing and measuring egalitarian democracy. Political Science Research and Methods, 7(3), 595-612

Signé, L., & Johnson, C. (2018). The potential of manufacturing and industrialization in Africa. Africa Growth Initiative.

Soete, L., & Freeman, C. (2012). The economics of industrial innovation. Routledge.

Solow, R. M. (1956). A contribution to the theory of economic growth. The Quarterly Journal of Economics, 70(1), 65-94.

Tang, K. B., & Bundhoo, D. (2017). Foreign aid and economic growth in developing countries: Evidence from Sub-Saharan Africa. Theoretical Economics Letters, 7(05), 1473.

Umlauf, R., & Burchardt, M. (2022). Infrastructure-as-a-service: Empty skies, bad roads, and the rise of cargo drones. Environment and Planning A: Economy and Space, 54(8), 1489-1509.

United Nations Conference on Trade and Development [UNCTAD]. (2023a). Technology and Innovation Report 2023 - Opening Green Windows: Technological opportunities for a low-carbon world. (UNCTAD/TIR/2022), Geneva, United Nations.

United Nations Conference on Trade and Development [UNCTAD] (2023b). Frontier Technology Readiness Index (Annual). https://unctadstat.unctad.org/datacentre/reportInfo/US.FTRI

Zhu, H., Li, Z., & Guo, P. (2018). The impact of income, economic openness and interest rates on housing prices in China: evidence from dynamic panel quantile regression.Applied Economics, 50(38), 4086-4098.