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Innovation, structural change, and inclusion. A cross country PVAR analysis

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posted on 2023-06-09, 12:29 authored by Amrita SahaAmrita Saha, Tommaso CiarliTommaso Ciarli
Structural change can be both, a cause or a consequence of innovation, while structural change and innovations are usually accompanied by short-term outcomes of social inclusion or exclusion. Inclusion may in turn have an impact on further innovations. Yet, we find little evidence in the literature on the three-way relations between innovation, structural change and inclusion. This paper advances a first exercise in this direction. Given the multidimensionality of each (innovation, structural change, and inclusion), we extract the underlying unobserved common factor structure from various well-known macro indicators. With a structural vector auto regression (SVAR) model for a short panel of developing countries over 13 years, we nd the following main results. First, we con rm the virtuous cycle between innovation and structural change, aligning with existing literature. Second, the strongest result is the positive effect of inclusion on both innovation and structural change, that suggests policy to improve inclusion beyond poverty and inequality. Third, on decomposing the innovation index (formal, firm-level and ICT), we find each related differently to both structural change and inclusion, that suggests specific policy roles in their infl uence on inclusion and structural change.

Funding

Pathways to Inclusive Development through Innovation, Technology and Structural Change; Inter- national Development Research Centre (IDRC)

ISIGrowth: Innovation-fuelled, Sustainable, Inclusive Growth; G1610; EUROPEAN UNION; 649186

History

Publication status

  • Published

File Version

  • Published version

Publisher

SPRU Working Paper Series

Pages

64.0

Place of publication

University of Sussex

Department affiliated with

  • SPRU - Science Policy Research Unit Publications

Institution

University of Sussex

Full text available

  • Yes

Legacy Posted Date

2018-03-19

First Open Access (FOA) Date

2018-03-21

First Compliant Deposit (FCD) Date

2018-03-19

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