Impact of R&D and Human Capital on Economic Growth in Ethiopia’s Innovation System

Abstract

In today’s world, national innovation system (NIS) is one way of fostering economic growth especially in developing countries. It is well known that human capital and research and development (R&D) are the fundamental pillars of NIS. The aim of this study is to evaluate the contribution of human capital and R&D on GDP through systematic review and validate theoretical results using empirical analysis. From systematic review result, labor force and research expenditure have positive impact and educational investment has long-term impact on GDP. A validation is required to give comprehensive conclusion about effect of R&D and human capital on GDP. Hence, linear regression analysis was implemented using primary education, secondary education, tertiary education, expenditure in R&D, researchers in R&D, and expenditure on education as independent variables whereas GDP as dependent variable. The world bank data of Ethiopia was used for 23 years data. The model findings depicted that R&D index has only statistically significant. Generally, the overall findings suggest that Ethiopia’s government should give attention on enhancing human capital and R&D by allocating enough research funding, creating strong relation among NIS actors, and formulating strategies and policies that increase skilled and educated manpower in various sectors for effective economic growth.

Keywords: Economic growth, Ethiopia, GDP, human capital, national innovation system, R&D

DOI: 10.7176/JESD/16-2-04

Publication date: March 30th 2025