Investing in Technology and Education to Sustain Economic Growth


IMPORTANCE OF INVESTMENT IN TECHNOLOGY AND EDUCATION BY THE UAE FOR SUSTAINED ECONOMIC GROWTH

Annotated Bibliography
Khateeb, F. B., Darrat, A. F. and Elkhal, K. (2007),” The UAE growth surge: have information technology and human capital contributed?”, Studies in Economics and Finance, Vol. 24, No. 4, pp. 297-306.
Khateeb et al (2007) discuss in their paper the impact of the investment in technology and education on economic growth in the UAE. They conclude that the investment in education and IT is essential for UAE in order to sustain economic growth in the long run.
Khateeb et al (2007) indicate that the UAE has been experiencing a tremendous real growth rate of approximately 10% since 2002, which is even better than the 5% real growth rate which it was achieving in the mid 1990s. The authors point out that this has been mainly been possible due to the huge oil and gas reserves of the country.

However, the authors also acknowledge the fact that the UAE has made huge investments in the educational as well as IT sector. According to Solow (1956) exogenous technological innovation is a primary growth factor and on the other hand, according to the endogenous model of Romer (1986) and Barro (1991), internal factors such as education and human capital play a significant role in the growth process. Hence, the authors feel that the UAE has taken steps as suggested by the Solow model and the endogenous model of growth in order to sustain long term growth.
The authors in their paper then carry out various regression and calculations to present a better picture of the contribution of human capital accumulation and technological innovation as factors of economic growth in UAE. The authors find out that though both the factors are important for the long term growth, human capital accumulation seems to play a pivotal role for the economic growth. The authors convey that they are not surprised with this result as, according to them, a lot of previous theories and researches have shown that investment in education is an important prerequisite for the adoption of computer-based technologies.

The authors then carry out the same calculations to get some results for the short run. However, they fail to find any correlation between the two factors and economic growth in the short run. The authors seem satisfied with this result and in fact say that they expected such results. “This finding should not be surprising since, human capital and IT are slow to bring in their full effect on economic growth” (Khateeb, Darrat and Elkhal, 2007, p. 303). They give an example of the US, a country which invested heavily in human capital accumulation and IT innovation in the 1970s and only started reaping the benefits of doing so in the mid 90s (Jalava and Pohjola, 2005).

The authors conclude saying that human capital accumulation and technological innovation are pivotal for the economical growth of UAE in the long run, with human capital accumulation being the more dominant factor. Also, the authors shed their concerns that the government might not invest in these fields as they believe the government of UAE might get deceived by the fact that these factors don’t result in immediate results and as a result might stop investing in these sectors.

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