Long-run Determinants of Technological Progress in Nigeria

Abstract

Growth economists established that sustainable economic growth depends considerably on the level of technological progress in an economy. Using growth accounting model, economic researchers were able to estimate a measure of technological progress in any economy which has been known as Total Factor Productivity (TFP). Several research works have been carried
out on the determinants of TFP in different countries using different  methodologies. This study utilized time series data sets on TFP constructed based on purchasing power parity covering from 1960-2010 to estimate long run determinants of technological progress in Nigeria using Vector Error Correction Mode(VECM)l. The co-integration result shows evidence of two cointegrating equations while the Fully Modified Ordinary Least Squares (FMOLS) shows that the chosen variables are significantly linearly correlated with TFP. The estimated VECM reveals that 0.025 percent of disequilibrium in the TFP model is corrected within a year while imports, domestic credit and exchange rate are favourable for TFP growth whereas trade and degree of openness are negatively related to TFP. Policies that will strengthen the financial sector, improve our trade and encourage investment in new capital are bound to engender growth of TFP.

Keywords: Total Factor Productivity, Technological,VECM.