Innovation, human capital, and economic growth in Ethiopia: A systematic review and empirical analysis

Abstract

National innovation systems are recognized as key drivers of economic growth, particularly in developing economies. Human capital and research and development are fundamental pillars supporting the effectiveness of these systems. This study evaluates the contribution of human capital and research and development to gross domestic product through a systematic review of prior research and empirical validation. The systematic review indicates that labor force participation and research expenditure positively influence gross domestic product, while educational investment exhibits a long-term impact. To provide a comprehensive understanding, the study employs a Cobb-Douglas production function model using World Bank data from 2000 to 2023. Empirical results reveal that both research and development and human capital have statistically insignificant effects on gross domestic product growth. These findings highlight the need for greater policy attention on strengthening human capital development and research capabilities by increasing research funding, fostering collaboration among innovation system actors, and implementing strategies to enhance the availability of skilled and educated personnel across sectors for sustainable economic growth.

Keywords: Economic growth, human capital; innovation system; research and development; systematic review.