Chagwiza, Cla ie a; Owusu-Sekye e, Emmanuel; Kap udza uwa, Fa ai
A icle
The e ec o go e nance on he ela ionship be ween
esea ch and de elopmen expendi u e and economic
g ow h in Sou h A ica
Economies
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MDPI – Mul idisciplina y Digi al Publishing Ins i u e, Basel
Sugges ed Ci a ion: Chagwiza, Cla ie a; Owusu-Sekye e, Emmanuel; Kap udza uwa, Fa ai (2024) :
The e ec o go e nance on he ela ionship be ween esea ch and de elopmen expendi u e and
economic g ow h in Sou h A ica, Economies, ISSN 2227-7099, MDPI, Basel, Vol. 12, Iss. 12, pp. 1-18,
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Ci a ion: Chagwiza, Cla ie a,
Emmanuel Owusu-Sekye e, and Fa ai
Kap udza uwa. 2024. The E ec o
Go e nance on he Rela ionship
Be ween Resea ch and De elopmen
Expendi u e and Economic G ow h in
Sou h A ica. Economies 12: 324.
h ps://doi.o g/10.3390/
economies12120324
Academic Edi o : Tsu omu Ha ada
Recei ed: 22 Oc obe 2024
Re ised: 17 No embe 2024
Accep ed: 20 No embe 2024
Published: 27 No embe 2024
Copy igh : © 2024 by he au ho s.
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4.0/).
A icle
The E ec o Go e nance on he Rela ionship Be ween Resea ch
and De elopmen Expendi u e and Economic G ow h
in Sou h A ica
Cla ie a Chagwiza 1,*, Emmanuel Owusu-Sekye e 2and Fa ai Kap udza uwa 1
1Fu u e A ica, Uni e si y o P e o ia, P e o ia 0186, Sou h A ica; [email p o ec ed]
2A ican Cen e o Economic T ans o ma ion (ACET), P e o ia 0081, Sou h A ica;
[email p o ec ed]g
*Co espondence: [email p o ec ed]
Abs ac : This s udy analyzes he e ec s o go e nance on he ela ionship be ween esea ch and
de elopmen expendi u e and economic g ow h in Sou h A ica using annual da a om 1997 o 2022
using an au o eg essi e dis ibu ed lag (ARDL) model. The calcula ed F- es s o he wo models in he
ARDL bounds es ing app oach o coin eg a ion e ealed a long- un ela ionship be ween he se ies.
In he model wi hou a media ing ac o , an insigni ican impac o esea ch and de elopmen (R&D)
expendi u e on economic g ow h is epo ed. Howe e , when R&D in e ac ed wi h go e nance, a
posi i e and signi ican impac was obse ed. This implies ha o R&D o ha e a posi i e impac
on economic g ow h, he e is a need o s ong and quali y go e nance o p o ide a conduci e
p oduc i e en i onmen . Fu he mo e, gi en he ambiguous ela ionship be ween go e nance and
economic g ow h, he G ange causali y es esul s showed ha go e nance g ange -causes economic
g ow h and no he o he way ound. The indings p esen ed in his pape a e expec ed o p o ide
some use ul insigh s o policymake s in Sou h A ica and he A ican con inen . The indings
demons a e he impo an ole ha go e nance plays in enhancing he de elopmen al pe o mance
o c i ical mac o-economic g ow h ac o s. The s udy po en ially gene a es new dimensions (by
including go e nance as a media ing ac o ) in he unde s anding o how he impac o R&D and
o he mac oeconomic pa ame e s on economic g ow h can be p omo ed.
Keywo ds: au o eg essi e dis ibu ed lag (ARDL); economic g ow h; esea ch and de elopmen
expendi u e; go e nance; Sou h A ica
1. In oduc ion
A ica is aced wi h nume ous sus ainable de elopmen al and geopoli ical challenges
including malnu i ion, clima e change, ood insecu i y and po e y (Haile and Wasike
2020). The NORAD (2023) epo u he i e a es ha long b ewing c ises including in-
c easing and unsus ainable deb , he accumula ed e ec s o he clima e and na u e c isis,
demog aphic ends ou o s ep wi h labou ma ke s, in la ion and ecession, and he
slowdown o he imp essi e po e y educ ion om ecen decades a e agg a a ing he
challenges al eady hinde ing global s abili y and p ospe i y. The abo e-men ioned chal-
lenges equi e ha nessing science, echnology and inno a ion (STI) h ough esea ch and
de elopmen (R&D) (Fu and Shi 2022;Akh a e al. 2016). A s udy by (Adenle e al. 2023)
on how STI can accele a e he achie emen o sus ainable de elopmen goals (SDGs) o all
sugges s ha human esou ce capaci y on STI is s ill low in many de eloping coun ies.
Thei indings sugges ha o achie e SDGs i is necessa y o s eng hen he educa ional
sys em, inc ease in es men in R&D p og ams and os e collabo a ion, among o he hings.
Mo eo e , R&D in es men can po en ially posi ion de eloping coun ies including A ica
o e ec i ely deal wi h i s challenges and also o engage wi h he Fou h Indus ial Re -
olu ion (4IR) (Fu and Shi 2022). As indica ed by Ildı a e al. (2016), R&D in es men is
Economies 2024,12, 324. h ps://doi.o g/10.3390/economies12120324 h ps://www.mdpi.com/jou nal/economies
Economies 2024,12, 324 2 o 18
one o he mos impo an ac o s ha a ec a coun y’s compe i i eness, economic g ow h
and de elopmen h ough i s in luence on he echnology capabili ies, inc easing esou ce
base and p omo ing e icien esou ce u iliza ion. In es ing in R&D also enables economies
o come up wi h echnologies and inno a ions ha a e c i ical in p o iding solu ions o
he socie al challenges ha he con inen is aced wi h. Fin ech is one such example o an
inno a ion wi h M-Pesa in Kenya being a game change in he digi al inancial se ices
ecosys em. M-Pesa has signi ican ly enhanced ou pu p oduc i i y and ou pu g ow h in
Kenya (Wachi a and Njuguna 2023) and is now se ing as a bluep in o o he A ican
coun ies and globally. This poin s o he impo ance o how inno a ion and R&D can ha e
a ans o ma i e and posi i e impac on an economy. Acco ding o Gu ib-Fakim and Signé
(2022), b idging he skills de iciency gap in STI is key o unlocking A ica’s po en ial and
accele a e economic g ow h and p ospe i y.
Despi e he impo ance o R&D in ealizing solu ions o na ional challenges, mos
A ican coun ies a e lagging behind in hei con ibu ion o R&D. This occu s despi e he
call om he Lagos Plan o Ac ion o Economic De elopmen o A ican coun ies o
spend a leas 1% o hei GDP on R&D (Iizuka e al. 2015). This ch onic unde in es men
p e en s he con inen om ans o ming i s in ellec ual capi al in o angible p oduc s,
echnologies and se ices ha could boos economic g ow h, li elihoods and well-being
(Ka iuki e al. 2023).
This pape ocuses on Sou h A ica because i is he la ges and mos indus ialized
economy in Sub-Saha an A ica and he e o e will se e as a good lea ning expe ience
o o he A ican coun ies. Al hough anked among he op in es o s in R&D in A ica,
s a is ics om he Wo ld Bank indica e ha Sou h A ica on a e age spends a meage 0.71%
o hei GDP on R&D, lagging behind he global a e age o 2.1%. Speci ically, Figu e 1
illus a es Sou h A ica’s R&D expendi u e as a pe cen age o GDP as compa ed o he
BRICS (B azil, Russia, India, China and Sou h A ica) coun ies and he wo ld. Fo Sou h
A ica, he end has always been almos cons an o e he yea s and dec easing since 2017,
whe eas he wo ld end has been ising since 2013. Mo eo e , in compa ison wi h o he
BRICS coun ies, Sou h A ica has he lowes ecen s a is ics on R&D expendi u e.
Economies 2024, 12, x FOR PEER REVIEW 2 o 18
Re olu ion (4IR) (Fu and Shi 2022). As indica ed by Ildı a e al. (2016), R&D in es men
is one o he mos impo an ac o s ha affec a coun y’s compe i i eness, economic
g ow h and de elopmen h ough i s in luence on he echnology capabili ies, inc easing
esou ce base and p omo ing efficien esou ce u iliza ion. In es ing in R&D also enables
economies o come up wi h echnologies and inno a ions ha a e c i ical in p o iding
solu ions o he socie al challenges ha he con inen is aced wi h. Fin ech is one such
example o an inno a ion wi h M-Pesa in Kenya being a game change in he digi al i-
nancial se ices ecosys em. M-Pesa has signi ican ly enhanced ou pu p oduc i i y and
ou pu g ow h in Kenya (Wachi a and Njuguna 2023) and is now se ing as a bluep in
o o he A ican coun ies and globally. This poin s o he impo ance o how inno a ion
and R&D can ha e a ans o ma i e and posi i e impac on an economy. Acco ding o
Gu ib-Fakim and Signé (2022), b idging he skills de iciency gap in STI is key o unlocking
A ica’s po en ial and accele a e economic g ow h and p ospe i y.
Despi e he impo ance o R&D in ealizing solu ions o na ional challenges, mos
A ican coun ies a e lagging behind in hei con ibu ion o R&D. This occu s despi e he
call om he Lagos Plan o Ac ion o Economic De elopmen o A ican coun ies o
spend a leas 1% o hei GDP on R&D (Iizuka e al. 2015). This ch onic unde in es men
p e en s he con inen om ans o ming i s in ellec ual capi al in o angible p oduc s,
echnologies and se ices ha could boos economic g ow h, li elihoods and well-being
(Ka iuki e al. 2023).
This pape ocuses on Sou h A ica because i is he la ges and mos indus ialized
economy in Sub-Saha an A ica and he e o e will se e as a good lea ning expe ience o
o he A ican coun ies. Al hough anked among he op in es o s in R&D in A ica, s a-
is ics om he Wo ld Bank indica e ha Sou h A ica on a e age spends a meage 0.71%
o hei GDP on R&D, lagging behind he global a e age o 2.1%. Speci ically, Figu e 1
illus a es Sou h A ica’s R&D expendi u e as a pe cen age o GDP as compa ed o he
BRICS (B azil, Russia, India, China and Sou h A ica) coun ies and he wo ld. Fo Sou h
A ica, he end has always been almos cons an o e he yea s and dec easing since
2017, whe eas he wo ld end has been ising since 2013. Mo eo e , in compa ison wi h
o he BRICS coun ies, Sou h A ica has he lowes ecen s a is ics on R&D expendi u e.
Figu e 1. R&D expendi u e (% o GDP)—Sou h A ica s BRICS coun ies and wo ld. Sou ce: Au-
ho s’ compu a ion using Wo ld Bank’s WDI da ase .
Abo e all, we a gue ha o any in e en ion o in es men o ha e a desi ed impac ,
he poli ical landscape o he coun y (o coun ies) in ques ion has o be a o able. In his
pape , he ole ha go e nance can play in in luencing he ela ionship be ween R&D
0
0.5
1
1.5
2
2.5
3
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
R&D expendi u e (% o GDP)
B azil China India
Russian Fede a ion Wo ld Sou h A ica
Figu e 1. R&D expendi u e (% o GDP)—Sou h A ica s BRICS coun ies and wo ld. Sou ce:
Au ho s’ compu a ion using Wo ld Bank’s WDI da ase .
Abo e all, we a gue ha o any in e en ion o in es men o ha e a desi ed impac ,
he poli ical landscape o he coun y (o coun ies) in ques ion has o be a o able. In
his pape , he ole ha go e nance can play in in luencing he ela ionship be ween R&D
expendi u e and economic g ow h is s udied. As indica ed by Kau mann e al. (2010),
Economies 2024,12, 324 3 o 18
public go e nance has o do wi h he adi ions and ins i u ions by which au ho i y in
a coun y is exe cised. This includes (a) he p ocess by which go e nmen s a e selec ed,
moni o ed and eplaced; (b) he capaci y o he go e nmen o e ec i ely o mula e and
implemen sound policies; and (c) he espec o ci izens and he s a e o he ins i u ions
ha go e n economic and social in e ac ions among hem. Hence, go e nance is included
in he model as a media ing ac o . E en hough he ocus o his s udy is on public
go e nance, we acknowledge ha p i a e go e nance (boa d composi ion; emune a ion,
and en i onmen al, social and go e nance (ESG)) as indica ed in de Ma iz e al. (2024) is
ela ed and equally impo an . In bo h cases, upholding go e nance in decision making a
all le els ansla es o be e ou comes. As indica ed by Meye (2022), good go e nance
is cen al o he g ow h and de elopmen o economies. The e is s ong e idence ha
go e nance and ins i u ions play a c i ical ole in accele a ing de elopmen and in educing
po e y in de eloping coun ies (Khan 2006).
One main con ibu ion o his s udy is ha i includes go e nance as an in e ac ion
a iable o see how i in luences he impac o R&D on economic g ow h. E en hough
he e a e some mul i-coun y panel s udies (no ably (Olaoye e al. 2021); (Akinwale and
Su ujlal 2021); Bay ak a e al. (2022); Özek (2020) and Pe o e al. 2012) ha ha e looked a
he e ec o R&D expendi u e on economic g ow h in Sou h A ica, no s udy has explo ed
how go e nance can a ec ha ela ionship. Mo eo e , wi h i s ocus on ins i u ions, his
s udy is highly pe inen o he global de elopmen agenda as i con ibu es no ably o
Sus ainable De elopmen Goal (SDG) 16: P omo e peace ul and inclusi e socie ies o
sus ainable de elopmen , p o ide access o jus ice o all and build e ec i e, accoun able
and inclusi e ins i u ions a all le els.
The cu en esea ch seeks o es he ollowing hypo heses in he Sou h A ican con ex :
H1:Economic g ow h is no a ec ed by R&D expendi u e in Sou h A ica.
H2:Economic g ow h is a ec ed by R&D expendi u e in Sou h A ica.
H3:Go e nance does no a ec he impac ha R&D expendi u e has on economic g ow h.
H4:Go e nance a ec s he impac ha R&D expendi u e has on economic g ow h.
The es o he pape is s uc u ed as ollows. Sec ion 2p o ides a e iew o he
li e a u e on R&D and go e nance, and he heo e ical amewo k upon which he s udy is
ancho ed. Sec ion 3p esen s he me hodological app oach, ou lining he da a sou ces and
da a analy ical echniques adop ed o analysis. The esul s a e p esen ed and discussed in
Sec ion 4. Las ly, Sec ion 5p esen s he conclusions and sugges s some ecommenda ions
o policy.
2. Li e a u e Re iew
Wi h he “new and old” challenges ha he wo ld is g appling wi h, esea ch on
he impac o R&D on economic g ow h has become a opic o in e es in he a ea o
de elopmen economics. Pelinescu (2015) asse s ha achie ing economic g ow h ha is
sma , sus ainable and inclusi e equi es, among o he hings, a g ea e o o c ea e a
esea ch-in ensi e economy. This can pa ly be achie ed i he economies can di ec unding
owa ds R&D (Sa pong e al. 2023). As indica ed by Ka han (2020), he ela ionship be ween
R&D and economic g ow h has been widely s udied wi hin he economic science ecosys em.
Using a ious me hodologies and da ase s, he indings on he R&D–g ow h nexus epo ed
in he li e a u e a e qui e mixed and he e o e canno be gene alized ac oss economies.
Fo ins ance, Bay ak a e al. (2022) examined he ela ionship be ween R&D expendi-
u es and g ow h in he pe iod o 2000–2018 in B azil, Russia, India, China, Sou h A ica,
and Tu kiye (BRICS-T) and ound ou ha R&D expendi u es posi i ely a ec he economic
g ow h o hose coun ies. E en hough he au ho s did no include go e nance, hey
acknowledge ha pa ame e s such as co up ion and bad go e nance will weaken he
e ec i eness o R&D, and his should be anspa en in R&D suppo policies. Simila ly,
ano he s udy by Özek (2020) ha ocused on BRICS-T using annual da a om 2003–2017
Economies 2024,12, 324 4 o 18
showed ha R&D expendi u e e ec i ely inc eases economic g ow h only in he long
un. Akinwale and Su ujlal’s (2021) case s udy o Sou h A ica and Saudi A abia be ween
2001 and 2018 also showed ha R&D signi ican ly impac de economic g ow h o bo h
coun ies in he sho un. In Sou h A ica, Pe o e al. (2012) analyzed he impac o
go e nmen R&D on he mac o-economy o Sou h A ica. The esul s indica e ha he eal
economic signi icance o R&D lies no in spending, bu in he ou comes. These ou comes
a e measu ed in e ms o con ibu ion o inno a ion as a key de e minan o economic and
social wellbeing, p oduc i i y, and g ow h and de elopmen .
In ano he s udy, Ildı a e al. (2016) explo ed he e ec o di e en ypes o R&D
expendi u es on economic g ow h o he selec ed OECD coun ies om 2003 o 2014 using
he GMM amewo k. Thei esul s showed ha all o he R&D expendi u es had posi i e
and signi ican e ec s on economic g ow h bu wi h a ying magni udes whe e business
en e p ise expendi u e had a highe impac as compa ed o go e nmen expendi u e.
Simila esea ch by Falk (2007) using da a om 1970 o 2004 concluded ha in es men s in
R&D signi ican ly inc eased GDP pe capi a.
A u he s udy by Coe e al. (1997) b ough an in e es ing angle in o he R&D–
economic g ow h nexus analysis. The au ho s es ima ed he spill-o e e ec o R&D
expendi u e in de eloped coun ies o de eloping coun ies. The indings sugges ha
de eloping coun ies ha ha dly in es in esea ch and de elopmen hemsel es bene i
om R&D ha is pe o med in he indus ial coun ies. Thei indings sugges ha an
inc ease in R&D expendi u e in indus ial coun ies posi i ely and subs an ially in luences
g ow h capaci ies o de eloping coun ies h ough high- ech goods impo ed om he
highly indus ialized economies, highligh ing he impo ance o ade. S a is ically speak-
ing, on a e age, a 1% inc ease in he R&D capi al s ock in he indus ial coun ies aises
ou pu in he de eloping coun ies by 0.06% (Coe e al. 1997).
Some s udies e en wen u he by disagg ega ing he sou ce o R&D expendi u e o
p i a e and public. Fo ins ance, Lich enbe g (1993) used da a spanning 1964–1989 om 74
coun ies o examine he ela ionship be ween he p i a e and public sec o R&D expen-
di u es and economic g ow h. The esul s e ealed ha p i a e sec o R&D expendi u es
posi i ely in luenced economic g ow h while public sec o R&D expendi u es did no ha e
any e ec on economic g ow h and in some cases signi ican ly and nega i ely in luenced
economic g ow h.
Ano he s udy by Gumus and Celikay (2015) u ilized da a om 52 coun ies om
1996 o 2010 and employed a dynamic panel da a model o assess he impac o R&D
expendi u e on economic g ow h. The indings showed ha R&D expendi u es ha e a
s ong and posi i e e ec on GDP in bo h he sho and long un o de eloped coun ies.
In con as , o de eloping coun ies he e ec s we e s ong in he long un bu weak
in he sho un. The s udy ecommended ha de eloping coun ies should alloca e
mo e esou ces owa ds R&D ac i i ies o speed up g ow h and economic pe o mance.
Samimi and Ale asoul (2009) also es ima ed he impac o R&D on economic g ow h o 30
de eloping coun ies using da a spanning om 2000 o 2006. Thei indings showed no
signi ican e ec o R&D expendi u es on economic g ow h o all he coun ies s udied.
The au ho s a ibu ed his non-signi icance o he low R&D expendi u e in he de eloping
coun ies unde examina ion.
The indings p esen ed he e a e qui e mixed (ei he posi i e, nega i e o non-signi ican )
and he e o e necessi a e he unde aking o he cu en s udy o es ablish how R&D expen-
di u e a ec s economic g ow h in he Sou h A ican con ex pa icula ly wi h go e nance
as a media ing ac o .
2.1. Does Go e nance Ma e ?
The inc eased acknowledgemen on he ole ha ins i u ions can play in p omo ing
economic g ow h ha e b ough abou esea ch wo k ocusing on he impo ance o go e -
nance as a media ing ac o in p omo ing economic g ow h and de elopmen . As alluded o
ea lie on, his s udy ocuses in pa icula on ins i u ions and how hey in luence economic
Economies 2024,12, 324 5 o 18
g ow h. Douglass No h, an Ame ican economis , p o ided he pionee ing wo k in he
ield o ins i u ional economics. He a gued ha ins i u ions, especially well-de eloped
p ope y igh s, plays an impo an ole in explaining economic g ow h. No h (1990)
hypo hesized ha when weal h-seeking indi iduals in socie y see a chance o make highe
p o i s ha a e impossible o ea n wi hin exis ing ins i u ional a angemen s, hey de ise
ways o make hese highe p o i s possible h ough ins i u ional changes. This ul ima ely
poin s o he impo ance o he quali y o go e nance. The Wo ld Bank (1994) de ined
go e nance as he manne in which powe is exe cised in he managemen o a coun y’s
economic and social esou ces o de elopmen . This de ini ion esona es well wi h he
idea wi hin which his s udy is amed. Go e nance in A ica plays a signi ican ole in
de e mining he ela ionship be ween he leade s and he ollowe s in alloca ing s a e
esou ces in o de o imp o e he socio-economic wellbeing o A icans (Momoh 2015). The
con inen ’s de elopmen al challenges a e la gely a ibu ed o go e nance ailu es (Dooms
and Fayoyin 2021). In Sou h A ica, he issue o go e nance is o pa icula impo ance
gi en i s ailu e o ealize subs an ial economic g ow h o e he pas 15 yea s owing o
poo go e nance, among o he ac o s (Be s ein 2023).
I is impo an o no e ha bo h dono s and ecipien s o global de elopmen inancial
esou ces acknowledge he impo ance o good go e nance as one o he c i ical sou ces
o economic g ow h and social de elopmen in de eloping coun ies (Fayissa and Nsiah
2013). Dono s a e inclined o und and in es in coun ies wi h good go e nance because
he likelihood o he esou ces being misused is minimal. Coun ies wi h ela i ely good
go e nance end o g ow a a as e a e, while he opposi e is ue o coun ies wi h
ela i ely bad go e nance (Adeleke 2014;Khan 2006).
Mixed indings on how go e nance can in luence economic g ow h ha e been epo ed
in he li e a u e. Adeleke (2014) used go e nance as an in e ac ing ac o when analyzing
he FDI–g ow h nexus in A ica. The esul s p o ided clea e idence ha go e nance
posi i ely in luenced economic g ow h when in e ac ing wi h FDI. The au ho concluded
ha A ican go e nmen s should pu e o in o enhancing hei go e nance s uc u es i
hey desi e o a ac mo e FDI and expe ience inc eased economic g ow h. In a simila
ein, Mah an (2023) used spa ial econome ics o es ima e he impac o go e nance on
economic g ow h in a sample o 116 coun ies wo ldwide in 2017. The esul s o he s udy
showed ha go e nance had a s a is ically signi ican posi i e impac on economic g ow h.
In con as , o he au ho s epo ed a nega i e ela ionship be ween go e nance and
economic g ow h. Using annual Poli y IV P ojec da a om 1970 o 2014 and dynamic panel
da a-es ima ion echniques, Owusu-Sekye e and Jonas (2017) in es iga ed he ela ionship
be ween democ acy and economic g ow h in i e Anglophone Wes A ican coun ies.
They ound a nega i e ela ionship be ween democ acy and economic g ow h when con-
side ing he ull sample. Thei gene al conclusion was ha democ acy is no a panacea o
economic g ow h in Anglophone Wes A ican coun ies bu mus be accompanied by good
go e nance and a heal hy in es men clima e o a ac he equi ed le els o capi al in es -
men , human capi al de elopmen ha can in luence g ow h, echnological p og ess and
a p oduc i e labo o ce. Howe e , coun y-speci ic esul s a ied. Fo ins ance, Nige ia
showed a posi i e ela ionship be ween democ acy and economic g ow h, whe eas Libe ia
and Sie a Leone showed a nega i e ela ionship; and he ela ionship was insigni ican o
Gambia and Ghana.
2.2. Theo e ical F amewo k
The e a e a ew heo e ical pe spec i es unde lying he ela ionship be ween R&D
expendi u e and economic g ow h. This s udy is he e o e based on he Endogenous
G ow h Theo y and he Solow G ow h Model. The Endogenous G ow h Theo y is buil
on he idea ha imp o emen s in inno a ion, knowledge, and human capi al lead o
inc eased p oduc i i y, posi i ely a ec ing he economic ou look o a na ion. I emphasizes
he impo an e ec s o he ac o s behind he echnological de elopmen such as R&D,
human capi al accumula ion, and ex e nali ies on long- e m g ow h (Ildı a e al. 2016). I
Economies 2024,12, 324 6 o 18
conside s long- un g ow h as a unc ion o echnological p og ess, and in his case p o ides
a amewo k in which R&D, h ough i s e ec on echnology and inno a ion, can p omo e
sus ainable economic g ow h. As indica ed by Inekwe (2015), ou basic inpu s in he
endogenous g ow h model a e physical capi al, human capi al, labo and echnology.
Complimen ing he Endogenous G ow h Theo y, he Solow G ow h Model conside s
he impo ance o in es men , echnological ad ancemen s, sa ings and popula ion g ow h
in ad ancing he economic g ow h o a coun y. An inc ease in echnological p og ess in-
c eases he p oduc ion and he e iciency o he labo o ce, he eby inc easing he coun y’s
GDP. Following his discussion, he cu en s udy bo ows om bo h heo ies as an ancho
o he p oposed model.
The Cobb–Douglas unc ion p o ides he basis o es ima ing he wo models o
economic g ow h. Hence, es ima ing he e u ns o R&D elies on he Cobb–Douglas p o-
duc ion unc ion augmen ed wi h knowledge capi al. Mo eo e , as indica ed by Zouhaie
(2012), ins i u ions can in luence economic g ow h h ough p oduc i i y o capi al accumu-
la ion. We he e o e adop a p oduc ion unc ion simila o he wo k o Zouhaie (2012) ha
inco po a es he ins i u ional ac o s in o he g ow h model. The model can be p esen ed in
i s simpli ied o m as ollows:
Y = ALαINST£ Cβ[K]γ[K0] φeu(1)
whe e Y measu es ou pu (g oss domes ic p oduc ), C is o dina y ( angible) capi al, K and
K0 designa es he in angible knowledge and ex e nal knowledge capi al, espec i ely, L
ep esen s labo o ce, INST ep esen s quali y o go e nance and A is a cons an e lec ing
he echnological s a ing posi ion o socie y
3. Da a and Me hodology
This sec ion ou lines he da a sou ces and p o ides de ini ions o a iables used in he
analysis. I discusses he da a analy ical echniques employed in he s udy and in oduces
he au o eg essi e dis ibu ed lag (ARDL) model linking economic g ow h (GDP) wi h
R&D, go e nance and o he mac o-economic a iables.
3.1. Da a Desc ip ion
The da a o his s udy we e ob ained om he Wo ld Bank’s Wo ld De elopmen
Indica o s (WDIs) and Wo ld Go e nance Indica o s (WGIs). The annual da a spanning
1997 o 2022 we e used o he analysis. Table 1shows all he a iables ha we e included in
he analysis. The dependen a iable is economic g ow h (G oss Domes ic P oduc —GDP).
The esea ch and de elopmen expendi u e (RDexp) is he main a iable o in e es since
we a e in e es ed in how i in luences economic g ow h. An in e ac i e e m be ween R&D
and go e nance (RDexp*GOV) was c ea ed o accoun o he impac o hei in e ac ion
on economic g ow h. O he mac oeconomic a iables included in he model include
u baniza ion, le el o domes ic in es men and o al labo o ce. U baniza ion se es as a
measu e o he ex en o how much a coun y is indus ialized.
The p incipal componen analysis (PCA) which acco ding o Lopes e al. (2023) is mos
commonly used o educe he dimensionali y o high-dimensional da ase s was used o
c ea e he index o he go e nance indica o . The e a e six b oad dimensions o go e nance
om he Wo ldwide Go e nance Indica o s (WGIs): Voice and Accoun abili y, Poli ical
S abili y and Absence o Violence/Te o ism, Go e nmen E ec i eness, Regula o y Qual-
i y, Rule o Law and Con ol o Co up ion. The sco e wi hin he index anges be ween
+2.5 and
−
2.5, wi h a sco e abo e ze o indica ing e ec i e go e nance and a sco e below
ze o indica ing ine ec i e go e nance. Howe e , ollowing a c ude analysis, only h ee
dimensions we e ound o ha e an impac on GDP in Sou h A ica and we e he e o e
used o c ea e he index: Go e nmen E ec i eness, Con ol o Co up ion and Regula o y
Quali y. The o he h ee dimensions we e he e o e excluded om c ea ing he composi e
index since hey did no signi ican ly in luence economic g ow h.
Economies 2024,12, 324 7 o 18
Table 1. Da a sou ces and de ini ions o a iables.
Va iable (As They Appea in he Model)
Sou ce De ini ion
GDP Wo ld Bank G oss Domes ic P oduc (base 2015)
RDexp Wo ld Bank Resea ch and de elopmen expendi u e (as a % o GDP)
GOV Wo ld Bank (WGI) Go e nance (as an a e age o he 6 go e nance indica o s)
RDexp*GOV Au ho s’ cons uc ion In e ac ion ac o be ween esea ch and expendi u e
and go e nance
INV (Le el o domes ic in es men ) Wo ld Bank G oss Fixed Capi al Fo ma ion (as a % o GDP)
LFTo al Wo ld Bank Labo o ce pa icipa ion a e, o al (% o o al popula ion
ages 15–64)
URB Wo ld Bank U ban popula ion g ow h (annual %)
* Au ho s’ cons uc ion = he au ho made a iables in e ac o c ea e an in e ac ion e m.
3.2. Analy ical Techniques
The da a we e analyzed using he ime se ies analysis app oach. The STATA so wa e
was employed o da a handling, managemen and analysis. We employed an econome ic
ime se ies model, he Au o eg essi e Dis ibu ed Lag model (ARDL) which was de eloped
by Pesa an and Shin (1999). The model was la e modi ied by Pesa an e al. (2001). The
model has some signi ican bene i s o e he o he ela ed models. Apa om being
sui able o sho e ime se ies and di e en o de s o in eg a ion, he ARDL bounds es
is capable o co ec ing endogenei y by p o iding e icien long- un es ima es wi h alid
-s a is ics.
The i s p ocedu e when dealing wi h ime se ies da a is o es he uni oo p ope ies
o he da a. This was done using he Augmen ed Dickey–Fulle (ADF) (1979) uni oo
es . The es abou he uni oo p ope ies o he se ies is c i ical o asce ain ha he
se ies a e eliable and e icien . To es ablish whe he o no he e is a long- un ela ionship
among he a iables, a bounds es p ocedu e o coin eg a ion by Pesa an e al. (2001) was
employed. The es compa es he es ima es o he F- alue and he c i ical alue om he
Pesa an e al. (2001) able. The Akaike In o ma ion C i e ia (AIC) we e used o choose a
sui able lag leng h. In he p esence o coin eg a ion, an e o -co ec ion model (ECM) is
hen es ima ed since coin eg a ion is he p econdi ion o es ima ing an ECM. The e o -
co ec ion e m, EC -1, can only be included in he exis ence o coin eg a ion amongs
he a iables unde s udy. In he absence o a long- un ela ionship, only he sho - un
equa ion is es ima ed. The ECM should be nega i e and s a is ically signi ican and his
shows ha he e is con e gence in he long un. Howe e , i he ECM comes ou posi i e,
i means ha he model is explosi e and he e is no con e gence in he long un.
The null hypo hesis (H
0
) sugges s ha he e is no coin eg a ion o a long- un ela ion-
ship amongs he a iables is p esen ed as ollows:
H0:β1=β2=β3=β4=β5=β6=0 (2)
The al e na i e hypo hesis s a es ha a long- un ela ionship exis s among he a i-
ables, implying he exis ence o coin eg a ion, as ollows:
H1:β1=β2=β3=β4=β5=β6=0 (3)
The F s a is ic is used as he decision c i e ia. I he calcula ed Wald F s a is ic is smalle
han he lowe bound o he c i ical alues, we canno ejec he H
0
and conclude ha he e
is no long- un ela ionship. Howe e , i he calcula ed F s a is ic is g ea e ha he uppe
bound o he c i ical alues hen we ejec he H
0
and conclude ha he e is a long- un
ela ionship. I he F s a is ic alls be ween he uppe - and lowe -bound c i ical alues, hen
he esul is inconclusi e.
Economies 2024,12, 324 8 o 18
Two models a e es ima ed, one wi hou a media ing ac o and he o he wi h go e -
nance as a media ing ac o as a unc ion o a numbe o mac o-economic a iables and is
speci ied as ollows:
GDP = (RDexp, GOV, INV, LFTo al, URB) (4)
The ARDL bounds coin eg a ion model o es o coin eg a ion be ween he a iables
in acco dance wi h Pesa an e al. (2001) was speci ied as ollows:
GDP =β0+ω1GDP −1+ω2RDexp −1+ω3GOV −1+ω4INV −1+ω5URB −1+ω6FFTo al −1+
q
∑
i=1β1∆GDP −i
+
q
∑
i=0β2∆RDexp −i+
q
∑
i=0β3∆GOV −i+
q
∑
i=0β4∆INV −i+
q
∑
i=0β5∆URB −i+
q
∑
i=0β6∆FLTo al −i+e
(5)
The sho - un dynamic ela ionship is es ima ed using an e o co ec ional model
o mula ed as ollows:
∆GDP =β0+
q
∑
i=1β1∆GDP −i+
q
∑
i=0β2∆RDexp −i+
q
∑
i=0β3∆GOV −i+
q
∑
i=0β4∆INV −i+
q
∑
i=0β5∆URB −i
+
q
∑
i=0β6∆LFTo al −i+δecm −1+e
(6)
whe e GDP is he dependen a iables,
β0
is he in e cep ,
β1
–
β6
a e he sho - un
elas ici ies (coe icien s o he i s -di e enced explana o y a iables), ecm
−1
is he e o -
co ec ion e m lagged o one pe iod,
ω1
–
ω6
a e he long- un elas ici ies (coe icien s o
he explana o y a iables),
δ
is he speed o adjus men ,
∆
is he i s di e ence ope a o , q
is he op imum lag leng h and e is he whi e noise.
A se ies o pos -es ima ion diagnos ic es s including no mali y, se ial co ela ion,
he e oscedas ici y and s abili y a e pe o med. Once he main analysis is comple ed, i is
impo an o pe o m all hese es s o check i he e a e issues wi h he model.
4. Empi ical Resul s and Discussion
In his sec ion, he esul s o he es ima ion o he ARDL model a e p esen ed and
discussed in ela ion o p e ious empi ical esul s. Pos -es ima ion diagnos ic es esul s
a e also p esen ed in his sec ion.
4.1. Desc ip i e S a is ics
A summa y o he mac o-economic a iables included in he model a e p esen ed in
Table 2. These s a is ics a e impo an because hey gi e a his o ical backg ound o he
a iables ha a e included in he model. The beha io o such mac oeconomic a iables
gi es impo an signals o policymake s, he eby allowing hem o an icipa e ends, o
iden i y a eas o conce n and o seize economic oppo uni ies. By looking a he minimum
and maximum igu es o he se ies, one can unpack a numbe o issues ega ding he
a iable in ques ion. The s anda d de ia ions o all he a iables a e gene ally small.
Va iables such as RDexp and URB bo h exhibi smalle s anda d de ia ions o 0.06 and 0.30,
espec i ely, he eby indica ing ha he se ies a e mo e s able. Fo GDP, he minimum is
−5.96 and he maximum is 5.60 wi h a s anda d de ia ion o 2.41, which is also no high.
Table 3p esen s he c oss-co ela ion analysis esul s be ween he dependen a iable
(GDP) and he explana o y a iables. The esul s show ha he e is a posi i e co ela ion
be ween R&D expendi u e, o al labo o ce, go e nance, in e ac ion be ween go e nance
and R&D and economic g ow h. This implies ha an inc ease in any o hese a iables is
expec ed o inc ease economic g ow h in Sou h A ica.
A nega i e co ela ion is obse ed be ween u baniza ion and economic g ow h. This
in e se ela ionship implies ha an inc ease in u baniza ion esul s in a dec ease in eco-
nomic g ow h in Sou h A ica. This nega i e ela ionship can be a ibu ed o he absence o
he enabling ac o s such as su icien good in as uc u e and employmen oppo uni ies.
Economies 2024,12, 324 15 o 18
o bo h models c oss he lowe limi a ound 2020. The gene al conclusion om he wo
g aphs is he e o e ha he wo models a e only s able a he 5% signi icance le el.
Economies 2024, 12, x FOR PEER REVIEW 15 o 18
The wo models we e es ed o s abili y o he sho - un and long- un coefficien s
h ough he cumula i e sum (CUSUM) and CUSUM o squa es (CUSUMSQ) es s. These
es s a e sugges ed by Pesa an and Shin (1999) as pa o pos -es ima ion es s and he null
hypo hesis (H0) sugges s ha he eg ession coefficien s a e s able. The g aphical p esen-
a ion o he s abili y es s o he wo models (model wi hou media ing ac o and model
wi h a media ing ac o ) a e shown in Figu es 2 and 3. The plo s o he CUSUM es o
bo h models c oss he lowe limi a ound 2020. The gene al conclusion om he wo
g aphs is he e o e ha he wo models a e only s able a he 5% signi icance le el.
Figu e 2. CUSUM squa ed es s o model wi hou media ing ac o . Sou ce: Au ho s’ cons uc ion
using STATA.
Figu e 3. CUSUM squa ed es o model wi h media ing ac o . Sou ce: Au ho s’ cons uc ion
using STATA.
5. Conclusions and Policy Implica ions
The ela ionship be ween R&D and economic g ow h has been in ensi ely s udied in
a ious con ex s. E en hough he indings epo ed a e qui e mixed, he gene al imp es-
sion is ha R&D posi i ely impac s economic g ow h. Howe e , less a en ion, i any, has
been gi en o he ole ha quali y o go e nance can play in in luencing he ela ionship
be ween R&D and economic g ow h. The s udy used he ARDL model o assess he impac
o R&D expendi u e on economic g ow h in Sou h A ica wi h go e nance as a media ing
Figu e 2. CUSUM squa ed es s o model wi hou media ing ac o . Sou ce: Au ho s’ cons uc ion
using STATA.
Economies 2024, 12, x FOR PEER REVIEW 15 o 18
The wo models we e es ed o s abili y o he sho - un and long- un coefficien s
h ough he cumula i e sum (CUSUM) and CUSUM o squa es (CUSUMSQ) es s. These
es s a e sugges ed by Pesa an and Shin (1999) as pa o pos -es ima ion es s and he null
hypo hesis (H0) sugges s ha he eg ession coefficien s a e s able. The g aphical p esen-
a ion o he s abili y es s o he wo models (model wi hou media ing ac o and model
wi h a media ing ac o ) a e shown in Figu es 2 and 3. The plo s o he CUSUM es o
bo h models c oss he lowe limi a ound 2020. The gene al conclusion om he wo
g aphs is he e o e ha he wo models a e only s able a he 5% signi icance le el.
Figu e 2. CUSUM squa ed es s o model wi hou media ing ac o . Sou ce: Au ho s’ cons uc ion
using STATA.
Figu e 3. CUSUM squa ed es o model wi h media ing ac o . Sou ce: Au ho s’ cons uc ion
using STATA.
5. Conclusions and Policy Implica ions
The ela ionship be ween R&D and economic g ow h has been in ensi ely s udied in
a ious con ex s. E en hough he indings epo ed a e qui e mixed, he gene al imp es-
sion is ha R&D posi i ely impac s economic g ow h. Howe e , less a en ion, i any, has
been gi en o he ole ha quali y o go e nance can play in in luencing he ela ionship
be ween R&D and economic g ow h. The s udy used he ARDL model o assess he impac
o R&D expendi u e on economic g ow h in Sou h A ica wi h go e nance as a media ing
Figu e 3. CUSUM squa ed es o model wi h media ing ac o . Sou ce: Au ho s’ cons uc ion
using STATA.
5. Conclusions and Policy Implica ions
The ela ionship be ween R&D and economic g ow h has been in ensi ely s udied in
a ious con ex s. E en hough he indings epo ed a e qui e mixed, he gene al imp ession
is ha R&D posi i ely impac s economic g ow h. Howe e , less a en ion, i any, has been
gi en o he ole ha quali y o go e nance can play in in luencing he ela ionship be ween
R&D and economic g ow h. The s udy used he ARDL model o assess he impac o R&D
expendi u e on economic g ow h in Sou h A ica wi h go e nance as a media ing ac o .
ADF es s we e employed o asce ain he o de o in eg a ion and he esul s showed
a mixed o de o in eg a ion (I(0) and I(1)), alida ing he use o he ARDL model. The
calcula ed F- es s o he wo models in he ARDL bounds es ing app oach o coin eg a ion
we e g ea e han he c i ical alue om he Pesa an e al. (2001) able, sugges ing a long-
un ela ionship be ween he se ies. In he model wi hou a media ing ac o , a nega i e and
insigni ican impac o R&D on economic g ow h is epo ed. Howe e , when R&D in e ac s
Economies 2024,12, 324 16 o 18
wi h go e nance, a posi i e and signi ican impac is obse ed. We, he e o e, ejec H
0
and
accep H
1
which s a es ha go e nance a ec s he impac ha R&D expendi u e has on
economic g ow h. The esul s u he e ealed ha u baniza ion has a nega i e impac on
economic g ow h. As indica ed by Sukanya and Tan ia (2023), u baniza ion can pose se e e
challenges wi h ega d o s ained in as uc u e, inadequa e housing, and social exclusion
which can all impede g ow h. Gi en he ambiguous ela ionship be ween go e nance and
economic g ow h, a G ange causali y es was employed o de e mine he di ec ion o
causali y be ween he wo a iables. The esul s showed ha go e nance G ange causes
economic g ow h and no he o he way ound.
Based on hese indings, he s udy ecommends ha :
•
Go e nmen s, pa icula ly in de eloping coun ies, should make su e o enhance good
go e nance s uc u es so ha o he c i ical mac o-economic ac o s such as R&D can
yield signi ican impac on economic g ow h
•
Go e nmen s should p io i ize in es ing mo e owa ds R&D so ha he e ec s on
economic g ow h can be mo e p onounced
•
Policymake s should also gi e mo e a en ion o non-economic issues such as go e -
nance when making policies since i de e mines how well he o he mac o-economic
ac o s unc ion o p omo e economic g ow h
•
U baniza ion should be p ope ly managed and con olled so ha i does no impede
economic g ow h bu a he p opels g ow h
We acknowledge ha his s udy has some limi a ions ega ding he leng h o he se ies.
I is he e o e impe a i e ha mo e egula da a be collec ed on he impo an ins i u ional
pa ame e s such as go e nance.
Au ho Con ibu ions: Concep ualiza ion, C.C. and F.K.; Me hodology, C.C. and E.O.-S.; So wa e,
C.C.; Valida ion, C.C., E.O.-S. and F.K.; Fo mal analysis, C.C.; Resou ces, C.C.; W i ing—o iginal
d a , C.C.; W i ing— e iew & edi ing, C.C., E.O.-S. and F.K.; Visualiza ion, C.C. All au ho s ha e
ead and ag eed o he published e sion o he manusc ip .
Funding: This esea ch ecei ed no ex e nal unding.
In o med Consen S a emen : No applicable.
Da a A ailabili y S a emen : The au ho s used publicly a ailable da ase s o de elop his manusc ip .
These da ase s can be accessed he e: (h ps://da abank.wo ldbank.o g/sou ce/wo ld-de elopmen -
indica o s and h ps://www.wo ldbank.o g/en/publica ion/wo ldwide-go e nance-indica o s).
Accessed on 20 Ma ch 2024.
Con lic s o In e es : The au ho s decla e no con lic s o in e es .
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