AGGREGATE PRODUCTION FUNCTION FOR KNOWLEDGE ECONOMIES IN ASIA: SYSTEM GMM INFERENCE

Growth empirics usually overlook the importance of knowledge and technology as determinants of growth and their complementarities with other factors. This paper develops a model to explain the role of knowledge, capital formation, interaction effects of tertiary education with information and communication technology and knowledge as determinants of economic growth. Sample of Asian countries have been used to analyze this model called as Tech-Know Income Model. Using dynamic specification of panel data model, data of selected Asian countries from 2000-2010 is analyzed. In empirical results, knowledge is found to be a significant factor of growth. Tech-Know income model confirms the importance of traditional factor of growth like ‘capital formation’ and ‘trade’ in addition to newer factors like ‘interaction effects’ of information and communication technology and knowledge with human capital. Recommendations are made to improve the quality of tertiary education and to focus on economically productive research specific to local needs of developing countries for ameliorated macroeconomic performance.