The interrelationships between economic growth and innovation: international evidence

Figures & data

Table 1. Describe variables.

Variable	Definition	Data Source
Economic growth (EG)	GDP growth (annual %)	(WDI, 2023)
Technological innovation (TI)	The number of patent applications, residents and non residents	(WDI, 2023)
Capital stock (K)	Gross fixed capital formation (% of GDP)	(WDI, 2023)
Population growth (PG)	Population growth (annual %)	(WDI, 2023)
Human capital (HC)	Labor force participation rate for ages 15–24, total (%)	(WDI, 2023)
Foreign direct investment (FDI)	Foreign direct investment, net inflows (% of GDP)	(WDI, 2023)
Financial development (FD)	Financial development index	(IMF, 2023)
Energy consumption (EC)	The natural logarithm of energy consumption per capita (kWh/person)	(Our World in Data-OWID, 2023)

IMF: International Monetary Fund.

WDI: World Development Indicators.

Table 2. Variables description.

Variable	Obs.	Mean	SD	Min	Max
EG	1,775	3.182	3.822	−15.136	19.681
TI	1,775	25149.87	113518.6	4	1,542,002
K	1,775	23.046	5.512	4.452	48.412
PG	1,775	0.789	1.010	−3.847	5.321
HC	1,775	45.717	12.858	16.144	83.03
FDI	1,775	4.875	18.094	−40.086	449.080
FD	1,775	0.424	0.239	0.026	1
EC	1,775	9.970	1.082	6.045	12.145

EG = Economic growth; TI = Technological innovation; K = Capital stock; PG = Population growth; HC = Human capital; FDI = Foreign direct investment; FD = Financial development; EC = The natural logarithm of energy consumption per capita.

Table 3. Correlations between variables.

Variables	EG	TI	K	PG	HC	FDI	FD	EC
EG	1
TI	−0.03	1
K	0.23	−0.03	1
PG	0.07	0.06	−0.00	1
HC	0.02	−0.03	−0.04	0.22	1
FDI	0.17	−0.03	0.10	−0.18	0.07	1
FD	−0.19	0.05	0.03	−0.01	0.34	−0.01	1
EC	0.18	−0.08	0.02	0.19	0.05	0.06	−0.36	1

EG = Economic growth; TI = Technological innovation; K = Capital stock; PG = Population growth; HC = Human capital; FDI = Foreign direct investment; FD = Financial development; EC = The natural logarithm of energy consumption per capita.

Table 4. Results of cross-sectional dependence tests by Pesaran CD test.

Variables	Pesaran CD test	Prob-value
EG	110.190***	0.0000
TI	2.844***	0.0044
K	17.818***	0.0000
PG	5.851***	0.0000
HC	82.926***	0.0000
FDI	32.098***	0.0000
FD	117.546***	0.0000
EC	22.461***	0.0000

EG = Economic growth; TI = Technological innovation; K = Capital stock; PG = Population growth; HC = Human capital; FDI = Foreign direct investment; FD = Financial development; EC = The natural logarithm of energy consumption per capita.

Table 5. Results of the panel stationarity tests.

Variables	Pesaran CADF test				Pesaran CIPS test
	Level		1st difference		Level		1st difference
	Intercept	Intercept & trend	Intercept	Intercept & trend	Intercept	Intercept & trend	Intercept	Intercept & trend
EG	−2.431***	−2.458*	−3.847***	−3.860***	−3.088***	−3.245***	−5.236***	−5.252***
TI	−2.195***	−2.735***	−4.030***	−4.120***	−2.805***	−3.417***	−5.063***	−5.183***
K	−2.029***	−2.330	−3.239***	−3.350***	−1.844	−2.118	−4.172***	−4.216***
PG	−1.899*	−2.493**	−2.982***	−3.061***	−1.452	−1.717	−2.908***	−2.914***
HC	−1.971**	−2.076	−2.844***	−2.972***	−1.775	−1.873	−3.788***	−3.945***
FDI	−2.657***	−3.125***	−4.422***	−4.424***	−3.541***	−3.892***	−5.707***	−5.791***
FD	−2.225***	−2.728***	−3.612***	−3.707***	−2.252***	−2.708***	−4.847***	−4.922***
EC	−0.784	−1.866	−2.635***	−2.754***	−1.009	−2.143	−3.989***	−4.125***

***p < 0.01, **p < 0.05, *p < 0.1.

EG = Economic growth; TI = Technological innovation; K = Capital stock; PG = Population growth; HC = Human capital; FDI = Foreign direct investment; FD = Financial development; EC = The natural logarithm of energy consumption per capita.

Table 6. The results of models.

Equation (1)(1) $\mathit{EG}=\mathit{f}\left(\mathit{TI},\mathit{K},\mathit{PG},\mathit{HC}\right)$(1) of SEM
Economic growth (EG)
Constant	−32.480*** (7.346)
TI	0.028*** (0.005)
K	0.003*** (0.001)
PG	−0.048 (0.347)
HC	0.203*** (0.061)
Country fixed effects	Yes
No. Obs	1,775
R^2	−5.897
Equation (2)(2) $\mathit{TI}=\mathit{f}\left(\mathit{EG},\mathit{FDI},\mathit{FD},\mathit{EC}\right)$(2) of SEM
Technological innovation (TI)
Constant	860.246*** (77.137)
EG	−30.075** (13.434)
FDI	0.084*** (0.025)
FD	−346.926** (160.152)
EC	0.105*** (0.030)
Country fixed effects	Yes
No. Obs	1,775
R^2	0.339

***p < 0.01, **p < 0.05, *p < 0.1.

SEM = Simultaneous equation model; EG = Economic growth; TI = Technological innovation; K= Capital stock; PG = Population growth; HC = Human capital; FDI = Foreign direct investment; FD = Financial development; EC = The natural logarithm of energy consumption per capita.

Table 7. Robustness checks with financial crisis.

Equation (1)(1) $\mathit{EG}=\mathit{f}\left(\mathit{TI},\mathit{K},\mathit{PG},\mathit{HC}\right)$(1) of SEM
Economic growth (EG)
Constant	−29.569*** (6.524)
TI	0.024*** (0.005)
K	0.003*** (0.0005)
PG	−0.034 (0.326)
HC	0.198*** (0.055)
Financial crisis	−2.341***(0.585)
Country-fixed effects	Yes
No. Obs	1,775
R^2	−4.509
Equation (2)(2) $\mathit{TI}=\mathit{f}\left(\mathit{EG},\mathit{FDI},\mathit{FD},\mathit{EC}\right)$(2) of SEM
Technological innovation (TI)
Constant	838.089***(77.628)
EG	−31.393** (12.134)
FDI	0.098*** (0.025)
FD	−296.151** (151.348)
EC	0.115*** (0.029)
Financial crisis	−4.285 (28.502)
Country-fixed effects	Yes
No. Obs	1,775
R^2	0.334

***p < 0.01, **p < 0.05, *p < 0.1.

SEM = simultaneous equation model; EG = Economic growth; TI = Technological innovation; K = Capital stock; PG = Population growth; HC = Human capital; FD I= Foreign direct investment; FD = Financial development; EC = The natural logarithm of energy consumption per capita.

Table 8. Robustness checks with institutional quality.

Part 1: equation (1)(1) $\mathit{EG}=\mathit{f}\left(\mathit{TI},\mathit{K},\mathit{PG},\mathit{HC}\right)$(1) of SEM
Economic growth (EG)
Constant	−35.150*** (8.472)	−40.079*** (9.876)	−34.584*** (8.225)	−36.609*** (8.761)	−35.776*** (8.522)	−33.301*** (7.320)
TI	0.028*** (0.006)	0.033*** (0.007)	0.028*** (0.006)	0.030*** (0.006)	0.029*** (0.006)	0.026*** (0.005)
K	0.003*** (0.001)	0.003*** (0.001)	0.003*** (0.001)	0.003*** (0.001)	0.003*** (0.001)	0.003*** (0.001)
PG	−0.083 (0.349)	−0.075 (0.366)	−0.051 (0.359)	−0.055 (0.362)	−0.031 (0.373)	−0.108 (0.333)
HC	0.183*** (0.058)	0.227*** (0.076)	0.208*** (0.063)	0.221*** (0.069)	0.217*** (0.067)	0.188*** (0.057)
CORRUPTION	0.005*** (0.002)
REGULATORY		0.004*** (0.002)
RULE			0.002* (0.001)
VOICE				0.003** (0.001)
GOVERNMENT					0.003** (0.001)
POLITICAL						0.005*** (0.001)
Country-fixed effects	Yes	Yes	Yes	Yes	Yes	Yes
No. Obs	1,775	1,775	1,775	1,775	1,775	1,775
R^2	−6.088	−8.250	−6.176	−7.015	−6.598	−5.179
Part 2: equation (2)(2) $\mathit{TI}=\mathit{f}\left(\mathit{EG},\mathit{FDI},\mathit{FD},\mathit{EC}\right)$(2) of SEM
Technological innovation (TI)
Constant	981.648*** (79.013)	933.111*** (78.582)	939.451*** (81.331)	910.065*** (79.693)	905.42*** (79.812)	917.989*** (79.671)
EG	−27.905** (13.136)	−29.541** (13.391)	−31.461** (13.414)	−32.259** (13.587)	−32.582** (13.570)	−30.947** (13.188)
FDI	0.080*** (0.025)	0.076*** (0.025)	0.083*** (0.025)	0.083*** (0.026)	0.085*** (0.026)	0.087*** (0.025)
FD	−354.392** (157.827)	−294.985* (157.000)	−348.111** (159.455)	−322.737** (158.908)	−345.652** (160.357)	−366.681** (158.791)
EC	0.099*** (0.029)	0.098*** (0.029)	0.105*** (0.030)	0.105*** (0.030)	0.106*** (0.030)	0.110*** (0.030)
CORRUPTION	−0.231*** (0.041)
REGULATORY		−0.146*** (0.042)
RULE			−0.142*** (0.043)
VOICE				−0.112** (0.045)
GOVERNMENT					−0.097** (0.042)
POLITICAL						−0.112*** (0.039)
Country-fixed effects	Yes	Yes	Yes	Yes	Yes	Yes
No. Obs	1,775	1,775	1,775	1,775	1,775	1,775
R^2	0.357	0.345	0.338	0.334	0.332	0.339

***p < 0.01, **p < 0.05, *p < 0.1.

SEM = Simultaneous equation model; EG = Economic growth; TI = Technological innovation; K = Capital stock; PG = Population growth; HC = Human capital; FDI = Foreign direct investment; FD = Financial development; EC = The natural logarithm of energy consumption per capita; CORRUPTION = control of corruption index; REGULATORY = regulatory quality index; RULE = rule of law index; VOICE = voice and accountability index; GOVERNMENT = government effectiveness index; POLITICAL = political stability index.

Table 9. Robustness checks with considering subsamples.

Part 1: equation (1)(1) $\mathit{EG}=\mathit{f}\left(\mathit{TI},\mathit{K},\mathit{PG},\mathit{HC}\right)$(1) of SEM
Economic growth (EG)
	High- and upper-middle-income group	Low- and lower-middle-income group
Constant	−26.796*** (6.627)	−1.785 (2.993)
TI	0.020*** (0.005)	−0.003 (0.007)
K	0.334*** (0.054)	0.003* (0.002)
PG	−0.324 (0.312)	−0.326 (0.378)
HC	0.136*** (0.041)	0.157*** (0.049)
POLITICAL	0.004*** (0.001)	0.002 (0.002)
Country-fixed effects	Yes	Yes
No. Obs	1,375	400
R^2	−1.778	0.184
Part 2: equation (2)(2) $\mathit{TI}=\mathit{f}\left(\mathit{EG},\mathit{FDI},\mathit{FD},\mathit{EC}\right)$(2) of SEM
Technological innovation (TI)
Constant	848.297*** (72.828)	320.197*** (39.340)
EG	−30.987*** (10.175)	−25.328** (10.742)
FDI	0.112*** (0.028)	−0.572 (2.541)
FD	−410.244*** (130.660)	−371.676*** (130.759)
EC	0.115*** (0.036)	0.131 (0.111)
POLITICAL	−0.100** (0.044)	−0.101 (0.091)
Country-fixed effects	Yes	Yes
No. Obs	1,375	400
R^2	0.365	−0.396

***p < 0.01, **p < 0.05, *p < 0.1.

SEM = Simultaneous equation model; EG = Economic growth; TI = Technological innovation; K = Capital stock; PG = Population growth; HC = Human capital; FDI = Foreign direct investment; FD = Financial development; EC = The natural logarithm of energy consumption per capita; POLITICAL = political stability index.

Table 10. The result of regressions – FEM, REM, and GMM system.

Variables	FEM	REM	GMM system
Equation (1)(1) $\mathit{EG}=\mathit{f}\left(\mathit{TI},\mathit{K},\mathit{PG},\mathit{HC}\right)$(1) : Economic growth (EG)
EGt-1			0.213*** (0.020)
TI	0.000 (0.000)	−0.000 (0.000)	0.000** (0.000)
K	0.001*** (0.000)	0.001*** (0.000)	0.001*** (0.000)
PG	−0.358*(0.190)	0.008 (0.135)	−1.454*** (0.175)
HC	0.130***(0.021)	0.035***(0.011)	0.297*** (0.015)
C	−4.130***(1.010)	0.025 (0.618)	−11.822*** (0.748)
No. Obs	1775	1775	1704
Hausman test	0.000
Wooldridge test	F(1,70) = 22.993 Prob > F = 0.000
Modified Wald test	Chi2(71) = 6482.97 Prob>chi2 = 0.000
AR(1)			−4.89 (0.000)
AR(2)			−1.64 (0.101)
Hansen test			68.96 (0.154)
Equation (2)(2) $\mathit{TI}=\mathit{f}\left(\mathit{EG},\mathit{FDI},\mathit{FD},\mathit{EC}\right)$(2) : technological innovation (TI)
TIt-1			0.815*** (0.018)
EG	−2.720 (2.447)	−2.261 (2.427)	−1.947*** (0.504)
FDI	0.044** (0.020)	0.036* (0.019)	0.003 (0.003)
FD	−195.227 (138.341)	−34.697 (98.672)	−124.260*** (43.734)
EC	0.025 (0.028)	0.009 (0.027)	−0.009 (0.012)
C	720.867***(67.931)	672.426*** (62.215)	193.006*** (22.964)
No. Obs	1775	1775	1704
Hausman test	0.1906
Wooldridge test		F(1,70) = 9.527 Prob > F = 0.0029
Breusch and Pagan LM test		Chibar2(01) = 2510.39 Prob>chibar2 = 0.000
AR(1)			−4.47 (0.000)
AR(2)			1.22 (0.222)
Hansen test			64.47 (0.134)

***p < 0.01, **p < 0.05, *p < 0.1.

FEM = fixed-effect model; REM = random-effect model; GMM = Generalized method of moments; EG = Economic growth; TI = Technological innovation; K = Capital stock; PG = Population growth; HC = Human capital; FDI = Foreign direct investment; FD = Financial development; EC = The natural logarithm of energy consumption per capita