The quality of life and social progress are growing in the world outpacing the growth rate of GDP per capita. One argument is that the diffusion of knowledge, innovation and ideas contributes to improve the quality of life in different countries. Innovations in healthcare can increase life expectancy and reduce mortality from various diseases.
Scientific advances in technologies such as ICTs or gadgets make our lives easier. While investments or commitments in R&D by the state and the private sector can strengthen innovative competitiveness.
For example, scientists Ray and Linden (2020), explore the determinants of life expectancy for the period 1995-2014 using data from 195 countries.
The study found that, along with other factors, spending R&D had a positive effect on increasing life expectancy. Lichtenberg (2005) evaluated the impact of the launch of a new drug on life expectancy in 52 countries between 1982 and 2001. Econometric data show that launching a new drug increases life expectancy by about 7 days.
In addition, innovation (expressed by R&D spending) has a direct positive impact on economic growth. For example, Wang et al. (2013) explores the relationship between R&D spending in innovative industries and GDP growth in the OECD and Taiwan over the period 1991-2006.
The study reports that the greatest effect is observed in middle-income countries. Humus and Celikai (2015) examined the relationship between R&D spending and economic growth in 52 countries between 1996 and 2010.
The purpose of this scientific article is to expand related research on innovation in several ways.
First of all, we will focus on the relationship between R&D spending and social progress across as many countries as possible. This allows us to test whether the benefits of innovation affect social well-being.
In the second instance, we take into account the impact of factors such as human capital quality, urbanization, and GDP per capita to calculate the direct impact of innovation without taking into account the effect of education or economic development. Our results show that innovation (R&D spending) has a significant positive association with the Social Progress Index (SPI). For example, if Uzbekistan can raise its performance to the level of upper-middle-income countries, the social index could rise by almost 20 points to the level of Malta.
The data for the study covers 131 countries for 2019-2020. The dependent variable in this study is the Social Progress Index (SPI) from the Social Progress Imperative. It is measured in three dimensions: basic human needs, the basis of well-being and opportunity. It ranges from 0 to 100, where higher scores reflect better social progress. The main independent variable is R&D expenditure as a percentage of GDP (averaged over 1996–2019 to maximize sample size). We use R&D spending as an indicator of national innovation. The data was taken from the World Bank.
Moreover, we include a number of variables that are considered to be the motivational forces of social progress and help us reduce the systematic error of missing variables. We take into consideration GDP per capita from the World Bank (an indicator of economic development), the level of urbanization from the World Bank (an indicator of demographic transformation), education index from the UN (human capital indicator) and the index of economic freedom (EFI) (indicator of the quality of institutions) from the Heritage Foundation. Descriptive statistics are presented in table 1.
The R&D expenditure ratio is positive and significant: an increase in R&D expenditure by 1 percentage point relative to GDP is associated with an increase in SPI by 11 points. However, this coefficient takes into account both the direct and indirect impact of innovations on social progress. Therefore, in column 2 we have included a number of controls. We include GDP per capita, urbanization, education index and economic freedom index.
These variables reflect the role of economic development, demographic transitions, human capital and institutional arrangements in social progress. All of these variables have a positive effect on SPI. For example, an increase in the education index by 1 SD is associated with an increase in SPI by 8 points (47 * 0.171). By a similar way, a 10-point increase in EFI results in a 1.3-point increase in SPI.
Taken as a whole, this model explains almost 90% of the international variations of SPI. R&D expenditures are positive and significant (p <0.1), although now their impact has decreased: an increase in R&D expenditures by 1 percentage point is associated with an increase in SPI by 1.13 points. The results show that innovation is a crucial aspect of social and economic progress in different countries.
An indicative forecast of the social development index was made if Uzbekistan is able to increase the level of GDP per capita, R&D spending, urbanization, education index and EFI to the level of above-average income countries. It is assumed that the coefficients in Table 2 increase the SPI from 65 to 84.3 (to the level of Malta).
We have made a reference guidance of the social progress index for Uzbekistan if the country is able to increase its spending on R&D, GDP per capita, urbanization, education index and EFI to the level of above-average income countries .It is assumed that the coefficients in Table 2 increase the SPI from 65 to 84.3 (to the level of Malta).
In the context of the phenomenon of «Industrialization 4.0», the desire of countries to reduce the carbon footprint and improve the quality of life of the population, innovative economic development becomes a priority postulate in ensuring sustainable economic growth.
In 2021, innovative economic development becomes a necessary condition for long-term economic development. Investments in technology and human capital should become the growth engine behind the transformation of industry, infrastructure, transport and the healthcare system. In consequence, this will make it possible to switch to a model of energy-efficient economic growth with the least damage to the environment. In particular, 87% of the world’s carbon dioxide emissions come from the use of traditional energy sources.
The leadership of Uzbekistan emphasizes the importance of innovation and science as a factor of long-term sustainable growth. It should be noted that the Decree of the President of the Republic of Uzbekistan PD-3365 dated on the 11th of November 2017 approved a program of comprehensive measures to strengthen the infrastructure of research institutions and the development of innovation activities for 2017-2021. In accordance with this program, $32.3 million is planned for equipping scientific and laboratory equipment and devices of scientific organizations for 2018-2021. For the reconstruction and overhaul of buildings and structures of scientific organizations – 116 billion Uzbek soums.
The analysis of the results of innovation activity showed that 1,423 billion Uzbek soums were allocated from the State Budget for the development of the sphere of science and scientific activity for 2018-2020, the amount of allocated funding for the implementation of one scientific project increased 3.5 times, 40% of which is provided for the purchase of scientific laboratory equipment, instruments and consumables, and it is planned to systematically increase the share of spending on science from GDP to 0.8% by 2021
Based on the best international experience, a new mechanism for the formation of a state order for research work has been introduced.
Raufkhon SALAKHODJAEV,
Associate Professor at Tashkent State University of Economics, Director of ERGO Analytics
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