EFFECTS OF INNOVATION ADVANCEMENT ON ECONOMIC GROWTH IN UGANDA: A GENERALIZED LEAST SQUARES APPROACH

Abstract

The paper uses the generalized least squares method to examine the effects of innovation advancement on economic growth in Uganda during the 1970 to 2020 period. Data sets employed in conducting empirical analyses were collected from the United Nations database. The paper is based on the neoclassical growth model with decreasing returns to scale because production often takes place within the feasible region of production. We also examine the effects of innovation on capital, labor, capital productivity, labor productivity, household consumption, investment spending, government spending, exports, imports, etc. in Uganda during the given period. Furthermore, we examine the influence of other variables on innovation and the individual influence of innovation on those variables. Empirical results show that innovation advancement caused economic growth and growth of other microeconomic variables in Uganda during the given period. All the variables considered had significant feedback effects on innovation. Hence, we recommend the application of innovation advancement to a great extent to enhance Uganda's economic growth; since it had most long term effect on economic growth in Uganda during the given period.