Comparative Advantage in the Knowledge Economy

A National and Organizational Resource

Rajib Bhattacharyya, Rajib Bhattacharyya

• Publisher: Emerald Publishing Limited
• Year: 2021
• ISBN:
  9781800710429
• Topic: Economics
• Subtopic: Econometrics
• Index: Economics

Globalization and information and communications technology (ICT) have played a pivotal role in revolutionizing value creation through the development of human capital formation. The constantly changing needs and structure of the labour market are primarily responsible for the conversion of a traditional economy relying fundamentally on the application of physical abilities to a knowledge-based economy relying on ideas, technologies and innovations. In this economy, knowledge has to be created, acquired, developed, transmitted, preserved and utilized for the improvement of individual and social welfare.
Comparative Advantage in the Knowledge Economy: A National and Organizational Resource provides a comprehensive and insightful understanding of all the dimensions of a transition from a traditional to a knowledge economy. It attempts to explain how educational achievement, skilled manpower, investment in knowledge capital and analytics will be the key to success of a nation's comparative advantage in the globalized era.
The volume should be of interest to students, researchers and teachers of economics, policy makers and advanced graduate students with an interest in economic analyses and development policy.

Chapter 1

Knowledge-Based Economy: Enhancing Economic Growth and Development of Human Capital Through Information and Communications Technology Education

Napoleon Kurantin and Bertha Z. Osei-Hwedie

Abstract

Globalization and the rapid development of Information and Communications Technology (ICT) have advantaged economies which have invested in (re)skilling their human capital in technical knowledge. Similarly, ICT have spearheaded the growth and development of industrial and service sectors in emerging economies. This accounts for the progress of some Asian economies and the lagging behind of many sub-Saharan African countries, including Ghana. Primarily, reorientation of economic development strategy and human development policy in tandem with the demands of knowledge-based economy (KBE) and related development in ICT explain the differences among the world's economies. Our chapter discusses the extent to which ICT has been incorporated into the educational system to transform it from traditional education in order to reskill human capital in postprimary schools to support the creation and growth of KBE in Ghana. Moreover, the chapter assesses whether ICT infrastructure and syllabuses at postprimary schools meet the challenges of a KBE and an enhanced growth development in Ghana. Using the theories of evolutionary economic change, new growth, technology and knowledge gap, we intend to analyze the progress and challenges faced by Ghana as it strives to build a KBE that thrives on innovation and creativity, which in turn drive economic growth and development. In this respect, we examine postprimary schools in Ghana.

Keywords Economic development; educational system; human capital; information and communications technology; knowledge-based economy; Ghana

JEL Classification J24

1. Introduction

In today's world, the economies are rapidly transiting toward being more knowledge-based, and supporting knowledge is a vital factor of the processes of economic growth and development. The trend of globalization has led all continents, regions, or countries to be actively involved in the global economy so that the competition is the main factor in progress. Knowledge-based economies (KBEs) provide an environment where competition is vital. The KBEs are an economic development model which emerged in the late 1990s in the Organization for Economic Co-operation and Development (OECD) (World Bank, 2007). This chapter discusses the extent to which Information and Communications Technology (ICT) has been incorporated into the educational system to transform it from traditional education in order to reskill human capital in postprimary schools to support the creation and growth of KBE in Ghana. To achieve the goal of the chapter, the study is divided into five sections. Section one is the introductory aspect; section two presents the literature review and theoretical and empirical evidence; section three dwells on the methodology model and data requirements; section four brings to the fore the results and interpretation of the extracted data; and the conclusion is to be found in section five.

2. Literature Review and Theoretical and Empirical Evidence

There appears to be no coherent definition of what constitutes KBE, although the concept itself is embedded in an extensive tradition of economic and social theories. It is believed the concept of knowledge economy has its roots in theories spanning information theory to that of theories relative to postindustrialism (Bell & Pavitt, 1993). Broadly, the concept of KBE is defined as an economy that is directly based on the production, distribution, and use of knowledge and information (OECD, 1996).

The primary goal of modern nation building has been the advancement of science, economic growth, and development. However, differences in the levels of economic development within and between developing countries persist despite efforts made in support of less spatial regions. These noted resultant differences have emerged when comparing countries and comparing regions within a country relative to Gross Domestic Product (GDP) and other indices. There are many reasons for such differences: historic, environmental, economic, and cultural. But the question is not only about the causes of this economic diversification but about the mechanisms of the most effective convergence tools as well. Technology change and innovation based on knowledge and scientific research are claimed to be the most important causes of diversification and at the same time one of the best ways for further development (Svare & Dabie, 2005).

The integration of science, technology, and the economy within a body of theories that promote KBE has emerged due to changes in material production after the end of World War II. They include the theories of economic growth, theories of evolutionary economic change, new growth, technology, and that of knowledge gap. This stems from the fact that neoclassical growth theories, to an extent, failed to offer any practical solutions for capitalizing on knowledge or turning knowledge into innovation, hence the need for a more policy-oriented approach emerged. The exogenous growth model perceived nonmaterial production factors, in particular, research and development (R&D) and education, as being the catalyst for economic growth (Solow, 1957).

However, unlike the Solow (1957) model that treated technology as given from the heavens that enhances human work and thus, leading to higher productivity, the new growth model brought to the fore a deliberate investment in endogenous variables, including human capital and scientific research based on knowledge that finally translate into goods leading to higher rate of economic growth (Romer, 1989, pp. 323–348). These theories not only influenced but more, importantly, impacted governments between the 1960s and 1990s, by prompting them to invest heavily in scientific research as the prime mover of new technological breakthroughs.

Due to the economic recession of the 1970s, evolutionary theory of technological change spurred certain best practices that policy-makers could apply to foster innovation and thus, economic growth and development. The foci of evolutionary theory were radical technological innovations such as the application of microelectronic revolution as the missing link and critical not in solving economic crisis but relevant to enhancing the processes of change, growth, and economic development (Nelson & Winter, 1982). Therefore, the coevolution of technologies, firms, and industry structures and their supporting governing institutions were perceived as critical for generating innovation (Svare & Dabie, 2005).

Over the past few decades, it is difficult to deny that important changes have been occurring in the means and ways that economies operate, and these changes revolve in part around the creation, transfer, and use of knowledge. Knowledge indeed has become by far the most important factor determining standard of living and/or well-being more so than land, capital, or labor (Leydesdorff, Cooke, & Olazaran, 2002). A research study involving the estimating and analysis of the processes of economic growth in Saudi Arabia, GDP is applied as a proxy for KBE as part of the country's vision 2030 (Amirat & Zaidi, 2020). The knowledge gap theory emphasizes that wealthier and more educated people acquire information from mass media faster than lower socioeconomic classes. Therefore, as mass media grows, so too does the gap in knowledge between the higher and lower social class (Tichenor, Donohue, & Olien, 1970).

Noted observers suggest that a KBE is built upon four pillars: First, it requires an economic and institutional framework that provides incentives for the efficient creation, the dissemination, and the use of knowledge to promote growth and increase welfare. Second, it needs an educated and skilled population that can create knowledge and use it. Third, innovation systems that can tap into the growing stock of global knowledge, adapt it to local needs, and transform it into products valued by markets are necessary. Finally, a dynamic information infrastructure is required that can facilitate effective communication and processing of information (Chen & Dahlman, 2005, pp. 1–24).

Although, interrelated, dynamically, it is the second pillar that stands out as the main pillar behind the processes of economic growth and development. Human capital and research are included in growth as knowledge, skills, competencies, and other attributes embodied in individuals (Health, 2001). There is a strong positive correlation between human capital and economic growth in 100 countries (Sab & Smith, 2001, pp. 2001–2032). A recent study showed that there is a positive and significant relationship between human capital and growth in 15 countries within the European Union (Cardoso & Pentecost, 2011, pp. 1193–1229).

More importantly, they found that both secondary and higher levels of education as proxies for human capital had a significant positive effect on regional growth in Portuguese regions. Similarly, other results indicated that human capital either resists income divergence across middle- and high-income nations or supports conditional convergence (Qadri & Waheed, 2013). The empiri...