| Abstract: |
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 approach, the findings show cointegration among
the variables. 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 converge to South
Africa’s growth trajectory. Moreover, for Nigeria, (i) knowledge
unidirectionally Granger cause growth, (ii) evidence of bidirectional
causality flow is apparent between trade, the economic incentive and growth
and (iii) health unidirectionally Granger cause knowledge. As for South
Africa: (i) there is bidirectional causality between knowledge, trade openness
and growth, whereas investment and economic incentive, unidirectionally
Granger causes growth, (ii) investment, trade openness and health
unidirectionally Granger cause knowledge and (iii) economic incentive
unidirectionally Granger cause trade openness. In conclusion, this paper
argues that a transformed education system can provide the knowledge base
essential for promoting and sustaining economic growth. |