Has knowledge improved economic growth? Evidence from Nigeria and South Africa

• Published date: 01 December 2022
• Author: Olatunji A. Shobande,Simplice A. Asongu
• Date: 01 December 2022
• DOI: http://doi.org/10.1002/pa.2763

RESEARCH ARTICLE

Has knowledge improved economic growth? Evidence

from Nigeria and South Africa

Olatunji A. Shobande

1

| Simplice A. Asongu

2

1

Business School, University of Aberdeen,

Aberdeen, UK

2

School of Economics, University of

Johannesburg, Johannesburg, South Africa

Correspondence

Simplice A. Asongu, School of Economics,

University of Johannesburg, Corner Kingsway

and University Road, Auckland Park, 2006,

Johannesburg, South Africa.

Email: asongus@afridev.org,

asongusimplice@yahoo.com

This study examines whether knowledge causes economic growth in Africa's two

leading economies, Nigeria and South Africa. Using the Vector Autoregressive and

Vector Error Correction approaches, the findings show cointegration among the vari-

ables. The speed of convergence of the variables to their long-term mean values is

relatively higher for South Africa than for Nigeria. In the short run, it is observed that

knowledge unidirectionally Granger causes growth for Nigeria, whereas bidirectional

causality is observed for South Africa. The higher correlation between knowledge

and growth in South Africa reflects the success of greater investment in education.

Nigeria must increase investment in education and modern infrastructure to con-

verge to South Africa's growth trajectory. Moreover, for Nigeria, (1) knowledge unidi-

rectionally Granger cause growth, (2) evidence of bidirectional causality flow is

apparent between trade, the economic incentive, and growth, and (3) health unidirec-

tionally Granger cause knowledge. As for South Africa (1) there is bidirectional cau-

sality between knowledge, trade openness, and growth, whereas investment and

economic incentive, unidirectionally Granger causes growth, (2) investment, trade

openness, and health unidirectionally Granger cause knowledge, and (3) economic

incentive unidirectionally Granger cause trade openness. In conclusion, this paper

argues that a transformed education system can provide the knowledge base essen-

tial for promoting and sustaining economic growth.

KEYWORDS

convergence, growth performance, knowledge-based economy, Nigeria, South Africa

1|INTRODUCTION

There is no consensus among economists on whether knowledge

accumulation significantly increases productivity and promotes eco-

nomic growth.

1

Critics argue that it may in fact lead to problems such

as over qualification (Kaur & Singh, 2016; Molla & Cuthbert, 2018),

overproduction (Britz et al., 2006; Odunsi, 2018), and lack of skill

development (Janoski et al., 2014; Okorafor, 2014).

In the developing world, however, the blame for low productivity

and growth may lie, not with knowledge accumulation, but with the inad-

equate financing of education and essential infrastructure. Evidence from

Africa shows that despite knowledge accumulation, economic growth is

not quantitative enough to accommodate the needs of the corresponding

rising population (Asongu et al., 2019,2020; Asongu & Odhiambo, 2019,

2020a). This study aims to determine whether knowledge Granger causes

growth in the two leading African economies—Nigeria and South Africa in

order to provide policy insights on how sustainable growth can be pro-

moted, inter alia, by means of the knowledge economy.

Beginning with Becker (1992,1994) and Mankiw et al. (1992),

who recognised knowledge as crucial for increasing output and pro-

moting economic growth, empirical literature on the role of the

knowledge economy (KE) has continued to accumulate. Becker (1976,

1993, 2007) developed and tested an economic framework that

explains the role of knowledge in growth. Subsequently, MRW (1992)

1

Growth and economic growth are used interchangeably throughout the study.

Received: 7 January 2021 Revised: 6 August 2021 Accepted: 20 September 2021

DOI: 10.1002/pa.2763

J Public Affairs. 2022;22(Suppl. 1):e2763. wileyonlinelibrary.com/journal/pa © 2021 John Wiley & Sons Ltd. 1of10

https://doi.org/10.1002/pa.2763