TOTAL FACTOR PRODUCTIVITY GROWTH AND INNOVATION POLICY TOOLS: EMPIRICAL STUDY

The primary purpose of this study is to find out the impact of innovation policy on the dynamics of total factor productivity (TFP). The approach of the Conference Board Total Economy Database is used to measure TFP. According to this method, the growth in output is the result of an increase in labour and capital service, where capital is decomposed into ICT capital, and non-ICT-capital, and labour is decomposed into pure employment quantity and labour quality. Thus, TFP growth captures technical change and the overall efficiency. The main contribution of this study to the literature is the following. TFP dynamics may be examined as the autoregressive distributed lag model, but different sets of the key indicators should be used to assess the determinants of TFP growth in various groups of countries. The Foreign direct investment proved to be an important channel of knowledge spillover and technological adoption for middle-income countries and countries exporters of natural resources. However, in post-industrial countries, the overall effectiveness of the innovation policy has the positive effects on total factor productivity growth.