Abstract:

This paper investigates the impact of innovation on economic growth and the direction of causality between innovation and economic growth for high and upper-middle income countries utilizing panel data analysis and Dumitrescu-Hurlin (2012) panel causality test for the period of 1996-2014. Gengenbach et al. (2016) test results reveal that there is a long run equilibrium relationship between variables. According to the CCE-MG and AMG results innovation tends to be positively associated with economic growth. Panel causality test results show that there exists bidirectional relationship between variables. The results show that, policymakers should take into consideration innovation policies as a tool to achieve economic growth.

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