Inclusive growth, innovation and economic development in South Africa : an empirical analysis

Abstract

This study focused on examining the contributions of inclusive growth and innovation towards economic development in South Africa. Empirically literature showed that there must be equitable opportunities for all economic participants regardless of economic class, gender, sex, disability, and religion. Thus, inclusive growth has been seen to be a weapon to curb poverty and inequality on a long-term perspective and the focus is on productive employment rather than merely direct income redistribution as a means of increasing income for excluded groups. This expands from traditional economic growth models such as the equity of health, human capital, environmental quality, social protection and food security in the country. Thus, inclusive growth goes hand in hand with innovation and economic development at large. This study employed the Autoregressive Distributed Lags (ARDL) approach on the annual time series data ranging from 1990 to 2018 obtained from the South African Reserve Bank and the World Bank. The results revealed that general government expenditure on education, gross fixed capital formation, and information and communication technology have a positive relationship with economic development in the long-run. On the contrary, trade openness and research and development have a negative impact on economic development in the long-run. In the short-run, government expenditure on education, gross fixed capital formation, and information and communication technology has a negative impact on economic development. In that case, trade openness and investment in research and development have a positive impact on economic development. The error correction term was found to be negative and significant which is an indication that the system will revert to equilibrium even though economic development will have a slow rate of speed of adjustment of about 0.04%. Lastly, the existence of unidirectional causality among the series was noticed. Therefore, this study advocate for bridging the gap between income inequality, improving education policies, managing social mobility in the long-run to balance inclusive growth