The Interactive Effect of Innovation, and Institutional Quality on GDP

Document Type : Research

Authors

1 Professor of Economics, Department of Economics, Faculty of Economics and Social Science, Alzahra University, Tehran, Iran

2 Assistant Professor of Economics, Faculty of Managmanet, Economy and Accunting, Hormozgan University, Bandarabbas, Iran,

3 MA in Economics, Department of Economics, Alzahra University, Tehran, Iran,

Abstract

Considering the significant gap between the GDP of developing and developed countries, identifying the factors that cause this gap is of particular importance between the most important of these factors, the difference in the level of innovation introduced. Innovation and its improvement promises to improve economic growth, and efforts to identify factors affecting innovation are considered prerequisites for designing policies affecting economic growth, which include economic structure and institutional quality. Institutions influence physical investment, human capital, technology, and the organization of production by reinforcing the key incentives of economic agents. Therefore, institutional quality can also approved as a key factor and foundation for continuous and stable economic growth. Finally, the existence of appropriate institutional quality through the channel of laws and economic tools leads to the expansion of innovation and creativity in the production process. With this background, the present study investigates the interactive effect of innovation and institutional quality on production based on panel data and the generalized method of moments (GMM). The gross domestic product of selected science-producing countries was analyzed separately from developed and developing countries from 2011 to 2020. The results show that the interactive effect of innovation and institutional quality on the GDP of both groups of selected developed and selected developing countries is positive and significant, except the intensity of its upshot on the GDP is large in the selected developed countries. Also, the effects of other variables, including the accumulation of physical capital, labor and human capital, on GDP in both groups of selected countries, with differences in the intensity of the effect, are estimated to be positive and significant.

Keywords

Main Subjects

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International Political Economy Studies
Volume 7, Issue 2
December 2025
Pages 159-178

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  • Receive Date: 09 January 2023
  • Revise Date: 17 May 2024
  • Accept Date: 08 October 2024

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