Accounting for innovative factors of economic growth in the production function of Cobb-Douglas (on the example of old industrial regions of Ukraine)

Abstract

Based on the analysis of the quantitative assessment of the influence of the factors of innovative activity on the dynamics of economic development and the endogenous determination of its contribution to the economic growth of the country, it is revealed that in foreign researches it is identified with the concept of the influence of scientific and technological progress. However, the impact of innovative factors on economic growth is not considered separately. Attempts of such a definition in Ukrainian researches are limited to well-known approaches: methods of integral assessment, methods of expert assessments, the method of multipliers, econometric models. Most of the approaches considered are focused on defining the innovative impact on economic development, rather than on economic growth. The main tool for assessing the role and innovative contribution to economic growth is the aggregate supply function model, usually based on the Cobb-Douglas production function. The analysis of the approaches used revealed a number of comments on econometric approaches. In contrast to this, an approach is proposed based on the neoclassical production function of Cobb-Douglas with a constant return to scale in the form of J. Tinbergen, with technical progress neutral according to J. Hicks, decreasing marginal productivity of macrofactors with limited interchangeability, which provides a causal functional (and not a statistical) relationship between input and output variables; does not require long time series. It is characterized by dynamic coefficients of elasticity, capital utilization rate and taking into account the innovation factor in each separate period. The innovation factor includes: the gross domestic expenditures on research and development, the expenditures on innovation, general expenditures on education. To define the contribution of formal innovation factor in economic growth applied "method of Solow residual", which by taking the logarithm and obtaining logarithmic derivatives in the production function, provides a formalized information about the contribution of each factor to economic growth and allows to develop the necessary regulatory measures. The method has been tested at the level of the country and old industrial regions of Ukraine: Dnepropetrovsk, Zaporozhye and Kirovograd regions of the Dnieper economic region of Ukraine. The role, importance and influence of the main factors of economic growth along with innovative ones on the part of the aggregate supply are considered and the cost-effectiveness of innovative factors is estimated.