Howl, Kadd ish and other Poems It is the belief in the art

Howl, Kadd ish and other Poems
It is the belief in the art of poetry that has gone hand in hand
with this man into his Golgotha , from that charnel house ,
similar
in every way, to that of the Jews in the past war. But this is in
our
own country, our own fondest purlieus. We are blind and live
our
blind lives out in blindness. Poets are damned but they are not
blind,
they see with the eyes of the angels. This poet sees through and
all
around the horrors he partakes of in the very intimate details of
his
poem. He avoids nothing but experiences it to the hilt. He
contains
it. Claims it as his own - and, we believe, laughs at it and has
the time
and affrontery to love a fellow of his choice and record that
love in
a well-made poem. Hold back the edges of your gowns, Ladies,
we
are going through hell.
William Carlos Williams
viii
Howl
For Carl Solomon

I
I saw the best minds of my generation destroyed by madness,
starving hysterical naked,
dragging themselves through the negro streets at dawn looking
for an angry fix,
angelheaded hipsters burning for the ancient heavenly connec-
tion to the starry dynamo in the machinery of night,
who poverty and tatters and hollow-eyed and high sat up
smoking in the supernatural darkness of cold-water flats
floating across the tops of cities contemplating jazz,
who bared their brains to Heaven under the El and saw Moham-
medan angels staggering on tenement roofs illuminated,
who passed through universities with radiant cool eyes hallu-
cinating Arkansas and Blake-light tragedy among the
scholars of war,
who were expelled from the academies for crazy & publishing
obscene odes on the windows of the skull,
who cowered in unshaven rooms in underwear, burning their
money in wastebaskets and listening to the Terror
through the wall,
who got busted in their pubic beards returning through Laredo
with a belt of marijuana for New York,
who ate fire in paint hotels or drank turpentine in Paradise
Alley, death, or purgatoried their torsos night after night

with dreams, with drugs, with waking nightmares, alcohol and
cock and endless balls,
Howl, Kaddish and other Poems
incomparable blind streets of shuddering cloud and light-
ning in the mind leaping toward poles of Canada &
Paterson, illuminating all the motionless world of Time
between,
Peyote solidities of halls, backyard green tree cemetery dawns,
wine drunkenness over the rooftops, storefront boroughs
of teahead joyride neon blinking traffic light, sun and
moon and tree vibrations in the roaring winter dusks
of Brnoklyn, ashcan rantings and kind king light of
mind,
who chained themselves to subways for the endless ride from
Battery to holy Bronx on benzedrine until the noise of
wheels and children brought them down shuddering
mouth-wracked and battered bleak of brain all drained
of brilliance in the drear light of Zoo,
who sank all night in submarine light of Bickford's floated
out and sat through the stale beer afternoon in desolate ·
Fugazzi' s, listening to the crack of doom on the hydrogen
jukebox,
who talked continuously seventy hours from park to pad to bar
to Bellevue to museum to the Brooklyn Bridge,
a lost battalion of platonic conversationalists jumping down
the stoops off fire escapes off windowsills off Empire
State out of the moon,

yacketayakking screaming vomiting whispering facts and
memories and anecdotes and eyeball kicks and shocks of
hospitals and jails and wars,
whole intellects disgorged in total recall for seven days and
nights with brilliant eyes, meat for the Synagogue cast
on the pavement,
who vanished into nowhere Zen New Jersey leaving a trail of
ambiguous picture postcards of Atlantic City Hall,
suffering Eastern sweats and Tangerian bone-grindings and
migraines of China under junk-withdrawal in Newark's
bleak furnished room,
who wandered around and around at midnight in the railroad
2
Howl
yard wondering where to go, and went, leaving no
broken hearts,
who lit cigarettes in boxcars boxcars boxcars racketing through
snow toward lonesome farms in grandfather night,
who studied Plotinus Poe St John of the Cross telepathy and
bop kabbalah because the cosmos instinctively vibrated
at their feet in Kansas,
who loned it through the streets of Idaho seeking visionary
indian angels who were visionary indian angels,
who thought they were only mad when Baltimore gleamed in

supernatural ecstasy.
who jumped in limousines with the Chinaman of Oklahoma on
the impulse of winter midnight streetlight smalltown rain,
who lounged hungry and lonesome through Houston seeking
jazz or sex or soup, and followed the brilliant Spaniard
to converse about America and Eternity, a hopeless task,
and so took ship to Africa,
who disappeared into the volcanoes of Mexico leaving behind
nothing but the shadow of dungarees and the lava and
ash of poetry scattered in fireplace Chicago,
who reappeared on the West Coast investigating the F.B.I. in
beards and shorts with big pacifist eyes sexy in their dark
skin passing out incomprehensible leaflets,
who burned cigarette holes in their arms protesting the narcotic
tobacco haze of Capitalism,
who distributed Supercommunist pamphlets in Union Square
weeping and undressing while the sirens of Los Alamos
wailed them down, and wailed down Wall, and the Staten
Island ferry also wailed,
who broke down crying in white gymnasiums naked and trem-
bling before the machinery of other skeletons,
who bit detectives in the neck and shrieked with delight in
policecars for committing no crime but their own wild
cooking pederasty and intoxication,
who howled on their knees in the subway and were dragged off
the roof waving genitals and manuscripts,

incomparable blind streets of shuddering cloud and light-
ning in the mind leaping toward poles of Canada &
Paterson, illuminating all the motionless world of Time
between,
Peyote solidities of halls, backyard green tree cemetery dawns,
wine drunkenness over the rooftops, storefront boroughs
of teahead joyride neon blinking traffic light, sun and
moon and tree vibrations in the roaring winter dusks
of Brooklyn, ashcan rantings and kind king light of
mind,
who chained themselves to subways for the endless ride from
Battery to holy Bronx on benzedrine until the noise of
wheels and children brought them down shuddering
mouth-wracked and battered bleak of brain all drained
of brilliance in the drear light of Zoo,
who sank all night in submarine light of Bickford's floated
out and sat through the stale beer afternoon in desolate ·
Fugazzi' s, listening to the crack of doom on the hydrogen
jukebox,
who talked continuously seventy hours from park to pad to bar
to Bellevue to museum to the Brooklyn Bridge,
a lost battalion of platonic conversationalists jumping down
the stoops off fire escapes off windowsills off Empire
State out of the moon,
yacketayakking screaming vomiting whispering facts and
memories and anecdotes and eyeball kicks and shocks of

hospitals and jails and wars,
whole intellects disgorged in total recall for seven days and
nights with brilliant eyes, meat for the Synagogue cast
on the pavement,
who vanished into nowhere Zen New Jersey leaving a trail of
ambiguous picture postcards of Atlantic City Hall,
suffering Eastern sweats and Tangerian bone-grindings and
migraines of China under junk-withdrawal in Newark's
bleak furnished room,
who wandered around and around at midnight in the railroad
2
Howl
yard wondering where to go, and went, leaving no
broken hearts,
who lit cigarettes in boxcars boxcars boxcars racketing through
snow toward lonesome farms in grandfather night,
who studied Plotinus Poe St John of the Cross telepathy and
bop kabbalah because the cosmos instinctivel y vibrated
at their feet in Kansas,
who loned it through the streets of Idaho seeking visionary
indian angels who were visionary indian angels,
who thought they were only mad when Baltimore gleamed in
supernatural ecstasy,
who jumped in limousines with the Chinaman of Oklahoma on

the impulse of winter midnight streetlight smalltown rain,
who lounged hungry and lonesome through Houston seeking
jazz or sex or soup, and followed the brilliant Spaniard
to converse about America and Eternity, a hopeless task,
and so took ship to Africa,
who disappeared into the volcanoes of Mexico leaving behind
nothing but the shadow of dungarees and the lava and
ash of poetry scattered in fireplace Chicago,
who reappeared on the West Coast investigating the F.B .I. in
beards and shorts with big pacifist eyes sexy in their dark
skin passing out incomprehensible leaflets,
who burned cigarette holes in their arms protesting the narcotic
tobacco haze of Capitalism,
who distributed Supercommunist pamphlets in Union Square
weeping and undressing while the sirens of Los Alamos
wailed them down, and wailed down Wall, and the Staten
Island ferry also wailed,
who broke down crying in white gymnasiums naked and trem-
bling before the machinery of other skeletons,
who bit detectives in the neck and shrieked with delight in
policecars for committing no crime but their own wild
cooking pederasty and intoxication,
who howled on their knees in the subway and were dragged off
the roof waving genitals and manuscripts,

who let themselves be fucked in the ass by saintly
motorcyclists,
and screamed with joy,
who blew and were blown by those human seraphim, the sailors,
caresses of Atlantic and Caribbean love,
who balled in the morning in the evenings in rosegardens and
the grass of public parks and cemeteries scattering their
semen freely to whomever come who may,
who hiccuped endlessly trying to giggle but wound up with a
sob behind a partition in a Turkish Bath when the blond
& naked angel came to pierce them with a sword,
who lost their loveboys to the three old shrews of fate the one
eyed shrew of the heterosexual dollar the one eyed shrew
that winks out of the womb and the one eyed shrew that
does nothing but sit on her ass and snip the intellectual
golden threads of the craftsman's loom,
who copulated ecstatic and insatiate with a bottle of beer
a sweetheart a package of cigarettes a candle and fell
off the bed, and continued along the floor and down
the hall and ended fainting on the wall with a vision
of ultimate cunt and come eluding the last gyzym of
consciousness,
who sweetened the snatches of a million girls trembling in the
sunset, and were red eyed in the morning but prepared
to sweeten the snatch of the sunrise, flashing buttocks
under barns and naked in the lake, ·
who went out whoring through Colorado in myriad stolen
night-cars, N.C., secret hero of these poems, cocksman

and Adonis of Denver-joy to the memory of his innu-
merable lays of girls in empty lots & diner backyards,
moviehouses' rickety rows, on mountaintops in caves or
with gaunt waitresses in familiar roadside lonely petti -
coat upliftings & especially secret gas-station solipsisms
of johns, & hometown alleys too,
who faded out in vast sordid movies, were shifted in dreams,
woke on a sudden Manhattan, and picked themselves up
out of basements hungover with heartless Tokay and
4
Howl
horrors of Third Avenue iron dreams & stumbled to
unemployment offices,
who walked all night with their shoes full of blood on the
snowbank docks waiting for a door in the East River to
open to a room full of steamheat and opium,
who created great suicidal dramas on the apartment cliff-banks
of the Hudson under the wartime blue floodlight of
the moon & their heads shall be crowned with laurel in
oblivion,
who ate the lamb stew of the imagination or digested the crab
at the muddy bottom of the rivers of Bowery,
who wept at the romance of the streets with their pushcarts
full of onions and bad music,
who sat in boxes breathing in the darkness under the bridge,
and rose up to build harpsichords in their lofts,

who coughed on the sixth floor of Harlem crowned with flame
under the tubercular sky surrounded by orange crates of
theology,
who scribbled all night rocking and rolling over lofty incan-
tations which in the yellow morning were stanzas of
gibberish,
who cooked rotten animals lung heart feet tail borsht & tortillas
dreaming of the pure vegetable kingdom,
who plunged themselves under meat trucks looking for an egg,
who threw their watches off the roof to cast their ballot for
Eternity outside of Time, & alarm clocks fell on their
heads every day for the next decade,
who cut their wrists three times successively unsuccessfully,
gave up and were forced to open antique stores where
they thought they were growing old and cried,
who were burned alive in their innocent flannel suits on
Madison
Avenue amid blasts of leaden verse & the tanked-up
clatter of the iron regiments of fashion & the nitrogly-
cerine shrieks of the fairies of advertising & the mustard
gas of sinister intelligent editors, or were run down by
the drunken taxicabs of Absolute Reality,
- .. I
L.

and Adonis of Denver-joy to the memory of his innu-
merable lays of girls in empty lots & diner backyards,
moviehouses' rickety rows, on mountaintops in caves or
with gaunt waitresses in familiar roadside lonely petti -
coat upliftings & especially secret gas-station solipsisms
of johns, & hometown alleys too,
who faded out in vast sordid movies, were shifted in dreams,
woke on a sudden Manhattan, and picked themselves up
out of basements hungover with heartless Tokay and
4
:~
I
!I
!.
I
"
(
:t
J, .
Howl
horrors of Third Avenue iron dreams & stumbled to
unemployment offices,
who walked all night with their shoes full of blood on the

snowbank docks waiting for a door in the East River to
open to a room full of steamheat and opium,
who created great suicidal dramas on the apartment cliff-banks
of the Hudson under the wartime blue floodlight of
the moon & their heads shall be crowned with laurel in
oblivion,
who ate the lamb stew of the imagination or digested the crab
at the muddy bottom of the rivers of Bowery.
who wept at the romance of the streets with their pushcarts
full of onions and bad music,
who sat in boxes breathing in the darkness under the bridge,
and rose up to build harpsichords in their lofts,
who coughed on the sixth floor of Harlem crowned with flame
under the tubercular sky surrounded by orange crates of
theology,
who scribbled all night rocking and rolling over lofty incan-
tations which in the yellow morning were stanzas of
gibberish,
who cooked rotten animals lung heart feet tail borsht & tortillas
dreaming of the pure vegetable kingdom,
who plunged themselves under meat trucks looking for an egg,
who threw their watches off the roof to cast their ballot for
Eternity outside of Time , & alarm clocks fell on their
heads every day for the next decade,
who cut their wrists three times successively unsuccessfully.
gave up and were forced to open antique stores where

they thought they were growing old and cried,
who were burned alive in their innocent flannel suits on
Madison
Avenue amid blasts of leaden verse & the tanked-up
clatter of the iron regiments of fashion & the nitrogly-
cerine shrieks of the fairies of advertising & the mustard
gas of sinister intelligent editors, or were run down by
the drunken taxicabs of Absolute Reality.
5
who jumped off the Brooklyn Bridge this actually happened
and walked away unknown and forgotten into the ghostly
daze of Chinatown soup alleyways & firetrucks, not even
one free beer,
who sang out of their windows in despair, fell out of the subway
window, jumped in the filthy Passaic, leaped on negroes,
cried all over the street, danced on broken wineglasses
barefoot smashed phonograph records of nostalgic Euro-
pean 1930s German jazz finished the whiskey and threw
up groaning into the bloody toilet, moans in their ears
and the blast of colossal steam-whistles,
who barreled down the highways of the past journeying to
each other's hotrod-Golgotha jail-solitude watch or
Birmingham jazz incarnation,
who drove crosscountry seventytwo hours to find out if I had
a vision or you had a vision or he had a vision to find out
Eternity,

who journeyed to Denver, who died in Denver, who came back
to Denver & waited in vain, who watched over Denver
& brooded & loned in Denver and finally went away to
find out the Time, & now Denver is lonesome for her
heroes,
who fell on their knees in hopeless cathedrals praying for each
other's salvation and light and breasts, until the soul illu-
minated its hair for a second,
who crashed through their minds in jail waiting for impossible
criminals with golden heads and the charm of reality in
their hearts who sang sweet blues to Alcatraz,
who retired to Mexico to cultivate a habit, or Rocky Mount to
tender Buddha or Tangiers to boys or Southern Pacific to
the black locomotive or Harvard to Narcissus to Wood-
lawn to the daisychain or grave,
who demanded sanity trials accusing the radio of hypnotism
& were left with their insanity & their hands & a hung
jury,
who threw potato salad at CCNY lecturers on Dadaism and
6
Howl
subsequently presented themselves on the granite
steps of the madhouse with shaven heads and harle-
quin speech of suicide, demanding instantaneous
lobotomy;
and who were given instead the concrete void of insulin

Metrazol electricity hydrotherapy psychotherapy occu-
pational therapy pingpong & amnesia,
who in humorless protest overturned only one symbolic ping-
pong table, resting briefly in catatonia,
returning years later truly bald except for a wig of blood, and
tears and fingers, to the visible madman doom of the
wards of the madtowns of the East,
Pilgrim State's Rockland's and Greystone's foetid halls, bick-
ering with the echoes of the soul, rocking and rolling
in the midnight solitude-bench dolmen-realms of love,
dream of life a night-mare, bodies turned to stone as
heavy as the moon,
with mother finally ******, and the last fantastic book flung
out of the tenement window, and the last door closed
at 4 A.M. and the last telephone slammed at the wall in
reply and the last furnished room emptied down to the
last piece of mental furniture, a yellow paper rose twisted
on a wire hanger in the closet, and even that imaginary;
nothing but a hopeful little bit of hallucination-
ah, Carl, while you are not safe I am not safe, and now you're
really in the total animal soup of time-
and who therefore ran through the icy streets obsessed with a
sudden flash of the alchemy of the use of the ellipse the
catalog the meter & the vibrating plane,
who dreamt and made incarnate gaps in Time & Space through
images juxtaposed, and trapped the archangel of the soul
between 2 visual images and joined the elemental verbs
and set the noun and dash of consciousness together
jumping with sensation of Pater Omnipotens Aeterna

Deus
to recreate the syntax and measure of poor human prose and
7
1
who jumped off the Brooklyn Bridge this actually happened
and walked away unknown and forgotten into the ghostly
daze of Chinatown soup alleyways & firetrucks, not even
one free beer,
who sang out of their windows in despair, fell out of the subway
window, jumped in the filthy Passaic, leaped on negroes,
cried all over the street, danced on broken wineglasses
barefoot smashed phonograph records of nostalgic Euro-
pean 1930s German jazz finished the whiskey and threw
up groaning into the bloody toilet, moans in their ears
and the blast of colossal steam-whistles,
who barreled down the highways of the past journeying to
each other's hotrod-Golgotha jail-solitude watch or
Birmingham jazz incarnation,
who drove crosscountry seventytwo hours to find out if I had
a vision or you had a vision or he had a vision to find out
Eternity,
who journeyed to Denver, who died in Denver, who came back
to Denver & waited in vain, who watched over Denver
& brooded & loned in Denver and finally went away to

find out the Time, & now Denver is lonesome for her
heroes,
who fell on their knees in hopeless cathedrals praying for each
other's salvation and light and breasts, until the soul illu-
minated its hair for a second,
who crashed through their minds in jail waiting for impossible
criminals with golden heads and the charm of reality in
their hearts who sang sweet blues to Alcatraz,
who retired to Mexico to cultivate a habit, or Rocky Mount to
tender Buddha or Tangiers to boys or Southern Pacific to
the black locomotive or Harvard to Narcissus to Wood-
lawn to the daisychain or grave ,
who demanded sanity trials accusing the radio of hypnotism
& were left with their insanity & their hands & a hung
jury;
who threw potato salad at CCNY lecturers on Dadaism and
6
Howl
subsequently presented themselves on the granite
steps of the madhouse with shaven heads and harle-
quin speech of suicide, demanding instantaneous
lobotomy,
and who were given instead the concrete void of insulin
Metrazol electricity hydrotherapy psychotherapy occu-
pational therapy pingpong & amnesia,
who in humorless protest overturned only one symbolic ping-

pong table, resting briefly in catatonia,
returning years later truly bald except for a wig of blood, and
tears and fingers, to the visible madman doom of the
wards of the madtowns of the East,
Pilgrim State's Rockland's and Greystone's foetid halls, bick-
ering with the echoes of the soul, rocking and rolling
in the midnight solitude-bench dolmen-realms of love ,
dream of life a night-mare, bodies turned to stone as
heavy as the moon,
with mother finally ******, and the last fantastic book flung
out of the tenement window, and the last door closed
at 4 A.M. and the last telephone slammed at the wall in
reply and the last furnished room emptied down to the
last piece of mental furniture , a yellow paper rose twisted
on a wire hanger in the closet, and even that imaginary;
nothing but a hopeful little bit of hallucination-
ah, Carl, while you are not safe I am not safe , and now you're
really in the total animal soup of time-
and who therefore ran through the icy streets obsessed with a
sudden flash of the alchemy of the use of the ellipse the
catalog the meter & the vibrating plane,
who dreamt and made incarnate gaps in Time & Space through
images juxtaposed, and trapped the archangel of the soul
between 2 visual images and joined the elemental verbs
and set the noun and dash of consciousness together
jumping with sensation of Pater Omnipotens Aeterna
Deus
to recreate the syntax and measure of poor human prose and

7
stand before you speechless and intelligent and shaking
with shame, rejected yet confessing out the soul to
conform to the rhythm of thought in his naked and
endless head,
the madman bum and angel beat in Time, unknown, yet
putting down here what might be left to say in time
come after death,
and rose reincarnate in the ghostly clothes of jazz in the
goldhorn shadow of the band and blew the suffering
of America's naked mind for love into an eli eli lamma
lamma sabacthani saxophone cry that shivered the cities
down to the last radio
with the absolute heart of the poem of life butchered out of
their own bodies good to eat a thousand years.
II
What sphinx of cement and aluminum bashed open their skulls
and ate up their brains and imagination?
Moloch! Solitude! Filth! Ugliness! Ashcans and unobtainable
dollars! Children screaming under the stairways! Boys
sobbing in armies! Old men weeping in the parks!
Moloch! Moloch! Nightmare of Moloch! Moloch the loveless!
Mental Moloch! Moloch the heavy judger of men!

Moloch the incomprehensible prison! Moloch the crossbone
soulless jailhouse and Congress of sorrows! Moloch
whose buildings are judgment! Moloch the vast stone of
war! Moloch the stunned governments!
Moloch whose mind is pure machinery! Moloch whose blood
is running money! Moloch whose fingers are ten armies!
Moloch whose breast is a cannibal dynamo! Moloch
whose ear is a smoking tomb!
Moloch whose eyes are a thousand blind windows! Moloch
whose skyscrapers stand in the long streets like endless
Jehovahs! Moloch whose factories dream and croak in
8
Howl
the fog! Moloch whose smokestacks and antennae crown
the cities!
Moloch whose love is endless oil and stone! Moloch whose
soul is electricity and banks! Moloch whose poverty is
the specter of genius! Moloch whose fate is a cloud of
sexless hydrogen! Moloch whose name is the Mind!
Moloch in whom I sit lonely! Moloch in whom I dream Angels!
Crazy in Moloch! Cocksucker in Moloch! Lacklove and
manless in Moloch!
Moloch who entered my soul early! Moloch in whom I am a
consciousness without a body! Moloch who frightened
me out of my natural ecstasy! Moloch whom I abandon!
Wake up in Moloch! Light streaming out of the sky!
Moloch! Moloch! Robot apartments! invisible suburbs! skel-

eton treasuries! blind capitals! demonic industries!
spectral nations! invincible mad houses! granite cocks!
monstrous bombs!
They broke their backs lifting Moloch to Heaven! Pavements,
trees, radios, tons! lifting the city to Heaven which exists
and is everywhere about us!
Visions! omens! hallucinations! miracles! ecstasies! gone down
the American river!
Dreams! adorations! illuminations! religions! the whole boat-
load of sensitive bullshit!
Breakthroughs! over the river! flips and crucifixions! gone
down
the flood! Highs! Epiphanies! Despairs! Ten years' animal
screams and suicides! Minds! New loves! Mad generation!
down on the rocks of Time!
Real holy laughter in the river! They saw it all! the wild eyes!
the holy yells! They bade farewell! They jumped off the
roof! to solitude! waving! carrying flowers! Down to the
river! into the street!
9
stand before you speechless and intelligent and shaking
with shame, rejected yet confessing out the soul to
conform to the rhythm of thought in his naked and
endless head,

the madman bum and angel beat in Time, unknown, yet
putting down here what might be left to say in time
come after death,
and rose reincarnate in the ghostly clothes of jazz in the
goldhorn shadow of the band and blew the suffering
of America's naked mind for love into an eli eli lamma
lamma sabacthani saxophone cry that shivered the cities
down to the last radio
with the absolute heart of the poem of life butchered out of
their own bodies good to eat a thousand years.
II
What sphinx of cement and aluminum bashed open their skulls
and ate up their brains and imagination?
Moloch! Solitude! Filth! Ugliness! Ashcans and unobtainable
dollars! Children screaming under the stairways! Boys
sobbing in armies! Old men weeping in the parks!
Moloch! Moloch! Nightmare of Moloch! Moloch the loveless!
Mental Moloch! Moloch the heavy judger of men!
Moloch the incomprehensible prison! Moloch the crossbone
soulless jailhouse and Congress of sorrows! Moloch
whose buildings are judgment! Moloch the vast stone of
war! Moloch the stunned governments!
Moloch whose mind is pure machinery! Moloch whose blood
is running money! Moloch whose fingers are ten armies!
Moloch whose breast is a cannibal dynamo! Moloch
whose ear is a smoking tomb!
Moloch whose eyes are a thousand blind windows! Moloch

whose skyscrapers stand in the long streets like endless
Jehovahs! Moloch whose factories dream and croak in
8
Howl
the fog! Moloch whose smokestacks and antennae crown
the cities!
Moloch whose love is endless oil and stone! Moloch whose
soul is electricity and banks! Moloch whose poverty is
the specter of genius! Moloch whose fate is a cloud of
sexless hydrogen! Moloch whose name is the Mind!
Moloch in whom I sit lonely! Moloch in whom I dream Angels!
Crazy in Moloch! Cocksucker in Moloch! Lacklove and
manless in Moloch!
Moloch who entered my soul early! Moloch in whom I am a
consciousness without a body! Moloch who frightened
me out of my natural ecstasy! Moloch whom I abandon!
Wake up in Moloch! Light streaming out of the sky!
Moloch! Moloch! Robot apartments! invisible suburbs! skel -
eton treasuries! blind capitals! demonic industries!
spectral nations! invincible mad houses! granite cocks!
monstrous bombs!
They broke their backs lifting Moloch to Heaven! Pavements,
trees, radios, tons! lifting the city to Heaven which exists
and is everywhere about us!
Visions! omens! hallucinations! miracles! ecstasies! gone down
the American river!

Dreams! adorations! illuminations! religions! the whole boat-
load of sensitive bullshit!
Breakthroughs! over the river! flips and crucifixions! gone
down
the flood! Highs! Epiphanies! Despairs! Ten years' animal
screams and suicides! Minds! New loves! Mad generation!
down on the rocks of Time!
Real holy laughter in the river! They saw it all! the wild eyes!
the holy yells! They bade farewell! They jumped off the
roof! to solitude! waving! carrying flowers! Down to the
river! into the street!
9
..
III
Carl Solomon! I'm with you in Rockland
where you're madder than I am
I'm with you in Rockland
where you must feel very strange
where you imitate the shade of my mother
where you've murdered your twelve secretaries

where you laugh at this invisible humor
where we are great writers on the same dreadful type-
writer
where your condition has become serious and is reported
on the radio
where the faculties of the skull no longer admit the
worms of the senses
where you drink the tea of the breasts of the spinsters of
Utica
where you pun on the bodies of your nurses the harpies
of the Bronx
where you scream in a straightjacket that you're losing
the game of the actual pingpong of the abyss
where you bang on the catatonic piano the soul is inno-
cent and immortal it should never die ungodly in an
armed madhouse
where fifty more shocks will never return your soul to its
IO

l
i
'•
J_ .
fr
Howl
body again from its pilgrimage to a cross in the void
where you accuse your doctors of insanity and plot the
Hebrew socialist revolution against the fascist national
Golgotha
where you will split the heavens of Long Island and resur-
rect your living human Jesus from the superhuman tomb
where there are twenty-five-thousand mad comrades all
together singing the final stanzas of the Internationale
where we hug and kiss the United States under our
bedsheets the United States that coughs all night and
won't let us sleep
where we wake up electrified out of the coma by our
own souls' airplanes roaring over the roof they've come
to drop angelic bombs the hospital illuminates itself

imaginary walls collapse O skinny legions run outside
0 starry-spangled shock of mercy the eternal war is
here O victory forget your underwear we're free
in my dreams you walk dripping from a sea-journey on
the highway across America in tears to the door of my
cottage in the Western night
San Francisco 1955-56
II
Haw!, Kaddish and other Poems
III
Carl Solomon! I'm with you in Rockland
where you're madder than I am
where you must feel very strange
where you imitate the shade of my mother
where you've murdered your twelve secretaries
where you laugh at this invisible humor

where we are great writers on the same dreadful type-
writer
where your condition has become serious and is reported
on the radio
where the faculties of the skull no longer admit the
worms of the senses
where you drink the tea of the breasts of the spinsters of
Utica
where you pun on the bodies of your nurses the harpies
of the Bronx
where you scream in a straightjacket that you're losing
the game of the actual pingpong of the abyss
where you bang on the catatonic piano the soul is inno-
cent and immortal it should never die ungodly in an
armed madhouse
where fifty more shocks will never return your soul to its
IO
Howl
body again from its pilgrimage to a cross in the void

where you accuse your doctors of insanity and plot the
Hebrew socialist revolution against the fascist national
Golgotha
where you will split the heavens of Long Island and resur-
rect your living human Jesus from the superhuman tomb
where there are twenty-five-thousand mad comrades . all
together singing the final stanzas of the Internationale
where we hug and kiss the United States under our
bedsheets the United States that coughs all night and
won't let us sleep
where we wake up electrified out of the coma by our
own souls' airplanes roaring over the roof they've come
to drop angelic bombs the hospital illuminates . itself
imaginary walls collapse O skinny legions run outside
0 starry-spangled shock of mercy the eternal war is
here O victory forget your underwear we're free
in my dreams you walk dripping from a sea-journey on
the highway across America in tears to the door of my
cottage in the Western night
San Francisco 1955-:56

II
1
Innovation and Diversification Policies
for Natural Resource Rich Countries
Mueid Al Raee
UNU MERIT, UM MGSoG
Supervisors
Professor Jo Ritzen

Dr. Denis de Crombrugghe
2
3
Contents
1. Introduction
...............................................................................................
..................... 7
Appendix 1-A
...............................................................................................
.................... 16
2. Productivity and Innovation Policy
.............................................................................. 19
2.1. Introduction
...............................................................................................
............ 20
2.2. Innovation policies and the path towards successful
innovation ............................ 24

2.3. Identification Strategy
...........................................................................................
29
2.4. Data
...............................................................................................
....................... 32
2.5. Results
...............................................................................................
.................... 36
2.5.1. Global
...............................................................................................
.............. 36
2.5.2. Arabian Gulf countries - A special case?
........................................................ 42
2.6. Conclusions and Discussion
................................................................................... 45
Appendix 2-A
...............................................................................................
.................... 49
Appendix 2-B
...............................................................................................
.................... 50
3. Policy and Economy in the GCC
.................................................................................. 53
3.1. Introduction
...............................................................................................
............ 55

3.2. Perspectives on innovation
.................................................................................... 59
3.2.1. General
...............................................................................................
............ 59
3.2.2. The literature on GCC countries
.................................................................... 61
3.3. The Case of GCC – Policies and Enablers
............................................................ 68
3.3.1. Section Summary
............................................................................................
68
3.3.2. Development of education systems
................................................................. 71
3.3.3. Literacy, primary education, secondary education,
reforms and performance 72
3.3.4. Tertiary education and vocational education
................................................. 77
3.3.5. R&D
...............................................................................................
................ 80
4

3.3.6. Business and
Entrepreneurship...................................................... ...............
.. 85
3.3.7. Governance and Infrastructure
....................................................................... 87
3.4. The Outputs of GCC – Indicators of Innovation and
Diversification .................... 89
3.4.1. Section Summary
............................................................................................
89
3.4.2. Patents, Trademarks and Industrial designs
.................................................. 91
3.4.3. Non-traditional sector - share in the economy and labour
productivity ......... 94
3.5. Connecting Policies, Enablers and Outcomes
........................................................ 96
3.6. Summary, Discussion and Conclusion
.................................................................... 98
Appendix 3-A
...............................................................................................
.................. 103
4. Natural Resource Abundance: No Evidence of an Oil Curse
...................................... 107
4.1. Introduction
...............................................................................................
.......... 109

4.2. Literature Review
...............................................................................................
. 110
4.3. Modelling the natural resource extraction and capital
investment relationship ... 113
4.4. Empirical Model
...............................................................................................
... 113
4.5. Data
...............................................................................................
..................... 121
4.6. Data Reliability
...............................................................................................
.... 124
4.7. Results
...............................................................................................
.................. 127
4.8. Postestimation tests and robustness
.................................................................... 133
4.9. Discussion and Conclusion
................................................................................... 134
5. “Stars in their Eyes?”
...............................................................................................
... 137
5.1. Introduction
...............................................................................................

.......... 138
5.2. Background and Literature
.................................................................................. 140
5.2.1. Diversification
..............................................................................................
140
5.2.2. Evaluation of Diversification Strategies
........................................................ 140
5.2.3. Methodologies for Evaluation
....................................................................... 143
5
5.2.4. Oman and Saudi Arabia Evaluations
........................................................... 144
5.3. The Predictive Model
..........................................................................................
146
5.4. Review of the Economic Plans of Oman and Saudi Arabia
................................. 147
5.4.1. Oman
...............................................................................................
............ 150
5.4.2. Saudi Arabia
...............................................................................................
. 151

5.4.3. Reference Condition and Scenarios
............................................................... 152
5.5. Results and Discussion
........................................................................................ 154
5.6. Summary and Conclusion
.................................................................................... 162
6. Conclusion
...............................................................................................
................... 165
6.1. Background of the dissertation
............................................................................ 165
6.2. Summary
...............................................................................................
.............. 166
6.3. Limitations and Suggestions for Future Research
................................................ 171
6.4. Integrated insights from the dissertation and policy
implications ........................ 174
6.4.1. Institutional Effectiveness, Productive Efficiency, Human
Capital, Education
and R&D
...............................................................................................
..................... 174
6.4.2. Natural Resources, Oil, Productivity and Investment
.................................. 176

6.4.3. Regional Infrastructure, International Trade and Peace
.............................. 178
7. References
...............................................................................................
.................... 181
6
7
1. Introduction
A challenge that many countries face today is the sustenance of
their economic growth in the
face of increasing reliance on natural resources. The number of
natural resource-driven
economies has increased from 58 in 1995 to 82 in 2017. 1
Among these countries, 57% were
low- and lower-middle-income countries, while only 13% were
high-income countries. The

natural resource-driven countries were home to more than two-
thirds of all people living in
extreme poverty. If low-income natural resource-driven
economies engaged in sound policy
for effective and efficient utilisation of natural resources, aimed
at broad economic
development, it is expected that almost half of the world’s poor
could be lifted out of poverty
by 2030. 2 This number is more than the number of poor people
lifted out of poverty due to
China’s rapid economic development from 1996 to 2015. In the
face of the fast-evolving global
demand for natural resources, diversification of the economy
offers a path for economic
development in low- and middle-income natural resource-driven
economies and for sustaining
economic growth in the high-income ones.
The central aim of this dissertation is to examine the challenge
faced by natural resource-
driven countries, in particular, the countries in the Arabian
Peninsula, to diversify their
economies. We investigate what policies can help stimulate
innovation and diversification in
natural resource-driven economies to ensure sustained

development. The research carried out
in this dissertation draws upon the evidence of the policies for
development in the global
context. This part of the dissertation is complemented by
research on the state of
1 Natural resource-driven economies are defined as those that
qualify under at least one of the criteria:
1. Natural resource rents are higher than 10% of the economic
output of the country, and/or,
2. Natural resource rents amount to more than 20% of the fiscal
revenue of the country, and/or,
3. Natural resource rents represent more than 20% of the total
exports of the country.
The natural resource-driven classification is used by various
sources (IMF, 2012; Dobbs, et al., 2013; Addison &
Roe, 2018). The 2017 classification of natural resource-driven
countries is based on the author’s calculations.
More details are presented in Appendix 1-A, Table 1.1.
2 See Dobbs, et al. (2013, pp. 5, 135-136) for the methodology
used in determining the estimated reduction of
poverty due to the effective and efficient utilisation of natural
resource rents. The poverty line of 1.90 USD 2011
PPP a day is used to determine the number of people living
under extreme poverty.
8

diversification and its relation to the policy measures
undertaken in the Gulf Cooperation
Council (GCC) 3 and its member countries.
The complexity of the problem at hand can be understood by
bringing together multiple
strands of academic literature. Some of the distinct yet
interconnected areas that this
dissertation relies upon include economics and policy of
innovation, growth economics, studies
of natural resource-driven economies and economic
diversification.
A review of the innovation policy literature at the outset of the
research for this dissertation
identified a need for more empirical and theoretical research in
the area. 4 Addressing this
need is expected to push the field further in its current
transition from pre-paradigmatic phase
towards a defined set of theories of innovation policy. It was
observed that research from the
broad innovation policy perspective was limited, and more
attention was needed for the
interaction of policy instruments with systemic conditions and
institutional settings.5 Lastly

and most importantly, discussions of suitable methodologies
were necessary to advance the
field and facilitate research that can close the gaps in the
innovation policy literature
mentioned earlier. One of the propositions has been to
understand the policy realm as having
two parallel spaces. The first space covers macro-level,
systemic and institutional enablers
and determinants of innovation, such as governance, education,
research and development
investment, business environment, fiscal policies, and
infrastructure. The second space
encompasses the dynamics of the innovation process itself such
as knowledge and skills
required, the creation of products and services, intellectual
property protection, incentives for
innovation, production factors, value chains and feedback. The
enablers and determinants in
3 The Gulf Cooperation Council (GCC) is the colloquial term
used to refer to the Cooperation Council of the
Arab States of the Gulf (GCC). We use the abbreviation GCC to
refer to the member countries as of 2017 –
Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United
Arab Emirates. These are synonymously referred
to as the countries of the Arabian Gulf, countries of the Arabian
Peninsula, countries of the Persian Gulf and

Arab countries of the Gulf. Other countries on the
Arabian/Persian Gulf such as Iran and Iraq, and countries
in accession talks such as Yemen, Jordan and Morocco are not
included.
4 For more information on the evolution of the innovation
policy literature landscape refer to Radosevic (2012),
Fagerberg (2016) and Borras and Edquist (2019).
5 According to Lundvall (2007) systems of innovation in a
narrow sense “leave significant elements of innovation-
based economic performance unexplained”. In the “broad” sense
the core knowledge-producing and disseminating
institutions (such as educational institutes and research units)
are embedded in a wider socio-economic system
and the relative success of innovation policies is a function of
influences and linkages beyond these core
institutions (Freeman, 2002).
9
both these spaces form the focus of the innovation policy
studies. Therefore, it is frequently
recommended to carry out more research that considers the
collective effect of these
determinants of innovation (Freeman, 2002; Lundvall, 2007;
Fagerberg, 2016).
The literature of systems of innovation from a growth theory
perspective has been criticised

for having a narrow conceptual scope. 6 Additionally, the policy
relevance of the results in this
line of research varies depending on the measures of growth and
innovation used.7 The
research for innovation policy through the growth theory lens
has been carried out using
various productivity measures, most prominently Multi-Factor
Productivity (MFP).
However, its use is challenged because of the imperfect
imputation for developing countries
and a lack of direct policy implications that can be derived from
research using MFP. Other
measures also face challenges and their use is context and
target-driven. Given this, the use
of labour productivity-based measures (such as labour
productivity in the modern sector) 8
generally increases the policy relevance of the results and
widens the geographical and
conceptual scope of the innovation policy studies. In addition to
this, innovation studies have
also been criticized as being too centred on rich countries. This
critique is made plain in the
question, “whether innovation systems and policies are only for
the rich” (Perez, 2013, p. 90) 9.

The substantial focus of innovation studies on innovation in the
developed or rich countries
has partially contributed to the lack of understanding about the
determinants of innovation
in a broader country income level context.
6 For more details on the literature of systems of innovation
from growth theory perspective see Fagerberg, et
al. (2013) and (Soete, et al., 2010).
7 The relationship between productivity and innovation, and a
detailed discussion on the pros and cons of the
alternative measures of innovation are presented in Mohnen and
Hall (2013).
8 In this dissertation the terms non-traditional sector and
modern sector exclude the natural resource and
agricultural sectors, unless otherwise mentioned. The sectors
where the productive efficiency is a function of the
knowledge and skills of the labour force is often called the
productive sector or modern sector. In the empirical
literature, the modern sector has varyingly been defined to
exclude either the natural resource sector, or the
agricultural sector, or both sectors. This usage is derived from
the assumption that the natural resource and
agricultural sectors are predominantly non-productive sectors.
9 The question is posed by the editors of “Innovation Studies:
Evolution and Future Challenges” Jan Fagerberg,
Ben R. Martin and Esben Sloth Andersen to Carlota Perez as a
discussion point for her contribution in the book
(Fagerberg, et al., 2013).

10
One of the main limitations of the growth literature, in general,
is to ignore the importance
of natural resources in the economy (Sachs & Warner, 1995;
Auty, 2007). The same limitation
is also observed in the literature on innovation policy from the
growth perspective.
Additionally, the innovation policy mix for countries that are
close to the technological
frontier and for those that are far behind in the catching-up
process is likely to be different
(Szirmai, et al., 2011; Aghion, et al., 2014). Countries with
natural resources form a unique
subset of world economies. Among other reasons, the
uniqueness originates in the use of
natural resource revenues as a facilitator of broader economic
growth. Thus, investigations
that focus on the policy mix that has been used and can be used
in these countries for catch-
up, diversification and stimulation of innovation are warranted.
The natural resource

economics and policy literature for a long time has been
focussed on the so-called natural
resource curse and the search for its determinants. However,
some argue that the outcome of
the mismanagement of national revenues for a natural resource-
driven economy does not differ
from the consequence of the mismanagement of revenues in
countries that are not dependent
on natural resource revenues (Maloney, 2002). Even without the
precise assignment of blame
for the economic woes of the countries rich in natural resources,
the literature appears to lead
towards a probable solution. 10 The general inference is that the
diversification of natural
resource-driven economies is key for ensuring their long-term
economic development. This
concept is not dissimilar from the more generalised perspective
that countries that provide
more diverse products and services are more likely to have
higher output growth stability
(Krishnaa & Levchenko, 2013; Content & Frenken, 2016).
Given the reservations of the neo-classical literature in
considering the role of natural
resources as a contributor to economic growth, the theoretical

contributions in this area have
been limited. Also, the determinants of economic growth in
developed countries have
frequently been used to try to explain the same in low income
economies without
contextualising the research. Diversification policy has long
been a part of the national
discourse of natural resource-driven economies. However,
policy instruments in some countries
10 For more information on the natural resource economics
literature and the natural resource curse debate see
Badeeb, et al. (2017) and Papyrakis (2017).
11
have been limited to monetary and fiscal policy instruments,
and ineptly chosen targets for
economic policy programs make it hard to evaluate the
attainment of a positive net stimulus
or the lack thereof (World Bank Institue, 2010). Such
complications in policy design,
evaluation and implementation are symptomatic of the absence
of research-based innovation
and diversification policymaking. There is a lack of

comprehensive theoretical background
that adequately applies to a broad set of economies including
natural resource-driven and
developing economies. This limitation indicates that the
complacency of the academics and
economic policy consultants is as likely to be blamed as that of
the national governments and
policymakers for the failure of many countries to have an
effective innovation policy. Among
the natural resource-driven economies, the GCC countries have
attracted the general curiosity
of economists. However, the scientific publications aimed at
trying to understand the
economic structure, systems of innovation and the state of
diversification in the GCC
countries have been limited. The most frequently given reason
is the lack of data. In view of
the academic context described in the preceding paragraphs, we
have an opportunity to look
for the key where it is dark 11.
This dissertation presents a conceptual framework that can be
used to analyse the interplay
of the determinants of innovation and diversification. As a first
step, this is used in an

empirical exercise to discover the effective relationship between
selected determinants and
labour productivity growth in the modern sector. A discrepancy
among the regions is observed
and explored further by mapping the enablers and inputs of
innovation and diversification
for three GCC countries. The relationship of these determinants
is discussed in light of the
innovation and labour productivity outputs. These undertakings
support theorising in the
area of innovation policy studies and ensure that such theorising
covers the economic reality
and systemic conditions of all countries regardless of their
income levels.
11. The streetlight effect, or the drunkard's search principle, is a
type of observational bias that occurs when
people only search for something where it is easiest to look. A
parable featuring the Seljuk Sufi mystic Nasrudin
Hodja is considered as the earliest form of the story (Shah,
1964, p. 70). The parable relates him as looking for
his key outside his house because there was more light outside,
while he knew that the key was lost inside the
house. It was popularised in social sciences by Abraham Kaplan
in his book “The Conduct of Inquiry:
Methodology for Behavioural Science” (Kaplan, 1964).

12
The introduction of the natural resource sector in this
dissertation as an important
contributor to economic growth as well as to the development of
the modern sector follows
the same logic as mentioned above. The aim is to ensure that the
research contribution has
broad academic and policy applicability in terms of economic
structure and country income
classification. The research places a special emphasis on the
GCC countries to illustrate the
thesis that important economic questions can be addressed even
in a state of data scarcity.
Economists should never be wary of research on a seldom
studied region. Rather, the opposite
should be the norm, and, purposefully and promisingly, it has
often been so for the last ten
years. The frameworks, tools and models developed in this
dissertation can guide policymakers
to not only fix realistic targets for economic inputs and outputs
but also embed an ex ante
and ex post evaluation of the achievements into their programs.
Accordingly, the use of an

empirical model is presented to highlight the importance of
research-based policymaking.
The findings in the various chapters of this dissertation
illustrate that all the determinants
of the innovation system need to be working well in order to
stimulate innovation and
productivity growth in the modern sector. The highlights, along
with the structure of the
dissertation, are summarised in the following.
Chapter 2, titled “Productivity and Innovation Policy” presents
a conceptual framework of
innovation policy and its empirical application in developed and
developing countries. The
condition of the GCC region in terms of labour productivity
growth in the modern sector is
explored within the context of this model. The results of
Chapter 2 underscore the importance
of investment into enablers of innovation such as tertiary
education, and research and
development expenditures. It is observed that not only the level
of investment matters but
also the effectiveness of the system in which the policy is
executed. This observation highlights

the importance of improving governance and investing in the
development of institutions.
Chapter 2 also reveals that the modern sector in the GCC region
is performing relatively
poorly compared to other regions in terms of labour
productivity growth in the modern sector.
This is followed by a comprehensive review and comparative
analysis of the broad innovation
system in three of the six GCC countries in Chapter 3, titled
“Policy and Economy in the
13
GCC” in the form of an eclectic comparative case-study. We
present a snapshot of the
development of enablers and policies for diversification and
innovation in Oman, Saudi Arabia
and the United Arab Emirates and highlight the limitations of
their systems. The low
innovation and diversification output in these countries is a
consequence of the observed
limitations. This observation leads to the notion that the lowest-
performing policy area limits
the system performance and that it is essential to ensure the
robust performance of all the

determinants of the system.
Chapter 4 of the dissertation, “Natural Resource Abundance: No
Evidence of an Oil Curse”,
outlines a theoretical model in order to examine the possibility
of using natural resource
revenues to fund fixed capital investments and develop the
modern sector. It also examines
empirically, to what extent oil wealth has been used for
diversification by the six GCC
countries. Chapter 4 shows that the lower performance in the
GCC region in terms of labour
productivity growth in the modern sector is not due to natural
resource rents. The GCC
countries have been rather successful in investing their natural
resource revenues into fixed
capital. The chapter highlights that natural resource rents can be
used for the development
of the modern sector.
This is followed by an analysis of the stated economic
diversification policies of Oman and
Saudi Arabia contrasted against the predicted outcomes in
Chapter 5, titled “Stars in their
Eyes?”. It is an ex ante evaluation of national policy

programmes based on the empirical
model developed in Chapter 2. The challenges and prospects for
meeting the desired and
declared diversification targets are also discussed. The results
of Chapter 5 project that Oman
and Saudi Arabia are not likely to meet their 2030 targets for
diversification. A research-
backed discussion of the policy limitations and possible
pathways to meet future targets is
thus presented. It is observed that the several enablers that may
be improved through
investments must all be understood in the national and regional
context in order to achieve
successful diversification and improvements in the innovation
system of the country. In the
final Chapter 6, a short review of the background and results of
the dissertation are presented.
It summarises the chapters of the dissertation, formulates
academic research
14
recommendations, acknowledges some of the limitations of this
dissertation, proposes an

integrated view of the dissertation and outlines the policy
implications of the research carried
out. The synopsis of this dissertation is that there is no natural
resource curse and that there
is no one policy or area of investment that drives growth and
productivity in the modern
sector. A broad and holistic approach to academic enquiry in
innovation policy and
productivity growth in the modern sector is justified and
recommended. The policy relevance
of this dissertation, already discussed in the subsection
“Integrated insights from the
dissertation and policy implications,” is exposed a second time
in the “Valorisation
Addendum”.
The successes and limitations in the policy actions of the GCC
countries brought to light in
this dissertation support a broad approach to policymaking for
diversification. The GCC
countries started using their oil revenues for economic and
social development while in a
position of relative poverty in comparison to the rest of the
world (Khalaf & Hammoud, 1987;

Pamuk, 2006). 12 They invested in human capital, fixed capital
and the improvement of the
standards of living of their population. As a result, the GCC
countries successfully eradicated
extreme poverty in their countries, and by 2017 all the six GCC
countries were included in
the list of “very high human development countries” based on
their Human Development
Index (HDI) (UNDP, 2018; GCC-STAT, 2019). Along with
using their natural resources for
human development, the GCC countries have attempted to
stimulate diversification of their
economies and ensure sustained economic development. They
have been successful to varying
degrees and are undertaking policy actions to deepen
diversification aimed at securing and
increasing the prosperity gains of the last fifty years. The policy
lessons from the GCC
countries are critical for other natural resource-driven
economies. The empirical evidence from
this dissertation, on innovation policy, diversification and
natural resource-based
development, helps illustrate the importance of innovation and
diversification policy research.

The results demonstrate that low- and low-middle-income
natural resource-driven countries
12 By 1970s almost all GCC countries had control over a
substantial portion of the oil revenue generated from
oil extraction in their countries.
15
can utilise their natural resources effectively and efficiently and
aim their policies at diversified
production and broad economic development. Such
policymaking is expected to support
improvements in the state of their human development as it has
been accomplished by the
GCC countries, and also help eradicate poverty in all forms.
16
Appendix 1-A
Table 1.1 – Classification of countries as natural resource-
driven economies

Natural resource-driven economies are defined as those that
qualify under at least one of the criteria:
Export: Natural resource rents represent more than 20% of the
total exports of the country.
Revenue: Natural resource rents amount to more than 20% of
the fiscal revenue of the country.
Output: Natural resource rents are higher than 10% of the
economic output of the country.
Based on Addison and Roe’s (2018) definition in the book
“Extractive Industries” which is adapted from
McKinsey & Company’s report “Reversing the curse” (Dobbs,
et al., 2013). The resource dependence
classification, country income levels and poverty dynamics were
inspired by the mentioned references and are
based on the author’s calculations using the World Bank (2019)
data published under Creative Commons
Attribution 4.0 International License (CC-BY 4.0).
Country Name Exports Revenue Output World Bank Income
Level
Algeria ● ● ● Upper Middle Income
Angola ● ● ● Upper Middle Income
Armenia ● Upper Middle Income
Australia ● ● High Income
Azerbaijan ● ● ● Upper Middle Income
Bahrain ● High Income
Benin ● ● Low Income

Bhutan ● Upper Middle Income
Bolivia ● Upper Middle Income
Brazil ● Upper Middle Income
Brunei Darussalam ● ● ● High Income
Burkina Faso ● ● ● Low Income
Burundi ● Low Income
Cameroon ● ● Lower Middle Income
Central African Republic ● ● ● Low Income
Chad ● ● ● Low Income
Chile ● ● ● High Income
Colombia ● ● Upper Middle Income
Comoros ● Lower Middle Income
Congo, Dem. Rep. ● ● ● Low Income
Congo, Rep. ● ● ● Lower Middle Income
Cote d'Ivoire ● Lower Middle Income
Ecuador ● ● Upper Middle Income
Egypt, Arab Rep. ● ● Lower Middle Income
Equatorial Guinea ● ● ● Upper Middle Income

17
Level
Eritrea ● Low Income
Ethiopia ● ● ● Low Income
Gabon ● ● ● Upper Middle Income
Gambia, The ● Low Income
Ghana ● ● ● Lower Middle Income
Guinea ● ● ● Low Income
Guinea-Bissau ● ● ● Low Income
Guyana ● ● ● Upper Middle Income
Indonesia ● ● Upper Middle Income
Iran, Islamic Rep. ● ● ● Upper Middle Income
Iraq ● ● ● Upper Middle Income
Kazakhstan ● ● ● Upper Middle Income
Korea, Dem. People’s Rep. ● Low Income
Kuwait ● ● ● High Income
Kyrgyz Republic ● ● Lower Middle Income

Lao PDR ● ● Lower Middle Income
Liberia ● ● Low Income
Libya ● ● ● Upper Middle Income
Madagascar ● ● ● Low Income
Malawi ● ● Low Income
Malaysia ● Upper Middle Income
Mali ● ● ● Low Income
Mauritania ● ● ● Lower Middle Income
Mongolia ● ● ● Upper Middle Income
Mozambique ● ● ● Low Income
Myanmar ● ● Lower Middle Income
New Caledonia ● High Income
Niger ● ● Low Income
Nigeria ● ● Lower Middle Income
Oman ● ● ● High Income
Papua New Guinea ● ● ● Lower Middle Income
Peru ● ● Upper Middle Income
Qatar ● ● ● High Income

18
Level
Russian Federation ● ● ● Upper Middle Income
Rwanda ● ● Low Income
Saudi Arabia ● ● ● High Income
Senegal ● ● Lower Middle Income
Sierra Leone ● ● Low Income
Solomon Islands ● ● ● Lower Middle Income
Somalia ● ● ● Low Income
South Africa ● ● Upper Middle Income
Sudan ● ● Lower Middle Income
Suriname ● ● ● Upper Middle Income
Syrian Arab Republic ● ● Low Income
Tajikistan ● Low Income
Tanzania ● ● Low Income
Timor-Leste ● ● ● Lower Middle Income

Togo ● ● ● Low Income
Trinidad and Tobago ● ● ● High Income
Turkmenistan ● ● ● Upper Middle Income
Uganda ● ● ● Low Income
United Arab Emirates ● ● ● High Income
Uzbekistan ● ● ● Lower Middle Income
Venezuela, RB ● ● ● Low Income
Yemen, Rep. ● ● Low Income
Zambia ● ● ● Lower Middle Income
Zimbabwe ● ● Lower Middle Income
19
2. Productivity and Innovation Policy
Education, Research & Development, Governance, Business,
and Productivity
Abstract
In this chapter, we examine the relationship between
“innovation policy” and labour

productivity growth in non-traditional sectors, for a cross-
section of more than 95 developed
and developing countries. We consider that labour productivity
growth in non-traditional
sectors is in part explained by innovation and catch-up. In
developing countries, catch-up is
a substantial contributor to productivity increases in addition to
new-to-the-world
innovations. The ability to catch-up is considered to be
dependent on the absorptive capacities
of the countries. We term the policies that contribute to
improvements in the absorptive
capacity as innovation policies. In this chapter, we include
investments in tertiary education
as a percentage of gross domestic product (GDP), investments
in research and development
(R&D) as a percentage of GDP, the freedom in the business
environment, as well as overall
government effectiveness. Our results confirm the convergence
of non-traditional sector labour
productivity amongst the countries. We could show a significant
positive effect of the
interaction between, government effectiveness, and, the
government expenditures in tertiary

education as a percentage of GDP, on labour productivity
growth in non-traditional sectors.
Also, for developing countries, a positive and significant
relationship between the growth
variable and effective R&D expenditures was observed. We
could not uncover a relationship
between other policies considered in this chapter and labour
productivity growth in non-
traditional sectors. Non-traditional sector labour productivity
growth in the oil-rich Arabian
Gulf countries was observed to be consistently slower than
western countries. We propose
that there is the likelihood of higher oil prices crowding-out
innovation in oil-rich countries
while stimulating innovation in oil-importing countries.
Keywords: Innovation policy, labour productivity, catch-up,
structural change, government
effectiveness, developing countries, Arabian Gulf countries.
JEL Classification: O2, O3, O38, O43, O47
20

2.1. Introduction
In this chapter, we analyse how individual innovation policies
and their interactions influence
labour productivity in non-traditional sectors and innovation
globally (both in developed as
well as in developing countries). We consider the different
strategies that may be required to
innovate under various conditions of development. We also
explore the relationship between
labour productivity growth and innovation policies in Arabian
Gulf countries, that are
characterised by a high share of natural resource rents in the
economy.
Knowledge, technological change, and innovation have been
introduced as drivers of growth
in the growth economics literature as it has moved beyond only
considering capital and labour
as sources of growth 13. It discusses healthy institutions as
necessary for technological change
and points towards innovation policy to nurture the institutions
that promote knowledge
production and technological progress. The lumping together of
the factors that contribute
to human capital, physical capital, and institutional capabilities

has been considered in the
1960s and 1970s as a common deficit in the literature. The need
for a more in-depth enquiry
of complementarities in policies that affect economic activities,
capabilities and institutional
arrangements has been emphasized by Easterly & Levine
(2001), Freeman (2002), Aghion et
al. (2009) and notably the winner of the 2018 Nobel Memorial
Prize in Economics, Paul
Romer (1994). As such, “innovation policy” including,
education policy, R&D policy, business
policy, and governance is considered in this chapter.
The role of education and R&D policy for innovation and
modern sector labour productivity
growth has been explored in the context of developed and
developing countries. This has
promoted the need for enquiries on whether higher education
and R&D expenditures have
dissimilar returns for developed and developing countries
(Krueger & Lindahl, 2001; Keller,
2006; Aghion & Durlauf, 2009). An important insight is that
countries could be more or less
13 Solow’s works, and studies by Denison, showed that

something other than labour and capital was responsible
for increasing growth rates in the US (Solow, 1957; Denison,
1963). Romer (1986) incorporated technology as
an endogenous factor in constructing a model of increasing
returns of technology and knowledge for long-run
growth.
21
efficient in the translation of innovation policies to productivity
growth and innovation
(Griffith, et al., 2004; Ritzen & Soete, 2011; Loukil, 2014).
Therefore, we consider the
effectiveness of the government in analysing the relationship
between labour productivity
growth in non-traditional sectors and innovation policy.
Considering that innovation-based
growth is less likely to affect traditional industries (Becheikh,
et al., 2006), we consider the
response of innovation policies, for both developed and
developing countries, to exhibit in the
non-traditional sector labour productivity growth. That is labour
productivity growth
exclusive of natural resource rents and agricultural value added.

Productivity can increase in three ways: through economies of
scale, through the utilisation
of unused capacity and by innovation. Innovation encompasses
creating new products and
services, adopting technology that is not available anywhere
else, adapting technology that
has been available elsewhere and as such moving towards the
best practice, improving
management techniques, and marketing novelty. Sectors where
capital investment is more
likely to increase economies of scale in the short-run include
traditional natural resource
extraction and agricultural sectors (Behrens, et al., 2007; Kislev
& Peterson, 1996). As such,
labour productivity excluding these traditional sectors is
expected to be more closely
associated with innovation. We term this part of the economy as
the modern sector
(interchangeably, non-traditional sector). In the modern sector
increasing output by utilising
the same input generally requires improving management
techniques (for enhancing
production), better supply chain (for delivering increased inputs
and production outputs),

and marketing innovation (for ensuring that production is
consumed in the market).
Productivity is defined as the index of output over the index of
input. Labour productivity is
one of the ways to measure productivity. It is the total output
over the total amount of labour
employed. As such, it does not account for inputs of capital in
the denominator. Another
approximate measure is the Total Factor Productivity also
termed as Multi-Factor
Productivity (MFP). It is measured as the Solow residual or
using the output of the economy
divided by weighted inputs of capital investment and labour .
The standard weighting of 0.7
for labour and 0.3 for capital is often employed. A concern with
the output measure used for
22
the MFP is that quality improvement is not accounted for within
this indicator as price
changes do not necessarily reflect the changes in quality. Using
output and input deflator is
also inaccurate as we may be undervaluing output deflators or

overvaluing input deflators
and by doing this, we might be reflecting price effects and not
necessarily innovation effects.
In their work “Innovation and Productivity: An Update”,
Mohnen and Hall (2013) provide a
brief review of the empirical literature and conclude that
innovation leads to better
productivity performance. They note that innovation affects
productivity increases through
both real output and the price. Innovators take advantage of the
two effects in order to
increase their profitability. Firstly, they are able to sell their
products or services at above
competitive prices, as in monopolistic competition at least for
some time. Secondly, the
product or service itself is higher quality and delivers higher
value to the consumer – this is
called the real innovation output. In terms of the limitation of
the productivity measure,
Mohnen and Hall find that the innovation price effect and the
innovation product effect (real
output) are hard to disentangle in the absence of good
individual price measures. It is
important to note that in this chapter, we are interested in

capturing catch-up effects as well
as new-to-the-world innovation effects. The innovation price
effect and innovation product
effect are both important in this context and the
disentanglement is not necessitated. Product,
process, organisational and marketing innovations all impr ove
productivity through either or
both of these effects, in other words, innovation leads to better
output per employee
performance.
Innovation counts are widely used to represent innovation,
specifically to account for the
innovation product effect. However, innovation counts are not
without limitations. In fact,
the reason that researchers are unable to find a stronger
association between productivity and
innovation may be related to the use of imperfect measures to
represent innovation (Mohnen
& Hall, 2013). It is thus suggested that recording innovation
counts in a continuous measure
including quality of innovation instead of a binary “yes or no”
format would lead to more
meaningful and robust estimates on the relationship between
productivity and innovation.

Patents while promising are controversial as they represent only
a small part of innovation.
23
Some patents may never be converted to finished and marketed
products or services. At the
same time, some innovation may never be patented. Also, new-
to-the-country and new-to-
the-region innovations may not be reflected in patent data. This
type of innovation is vital
in developing countries and accounts for the majority of
increases in labour productivity
through innovation.
In this chapter, we are interested in increases in labour
productivity associated with
innovation policy. As discussed above, we ensure that labour
productivity is closely related
to innovation by using labour productivity in the modern sector.
The issue of selecting the
most appropriate measure is however complicated further when
considering the availability
of data for a broad set of countries and, in particular, for the
Arab countries of the Gulf that

are the central focus of this dissertation. One commonly quoted
disadvantage of productivity
data is that of varying recording standards among countries. We
find that labour productivity
data is most widely available across countries and time. In order
to account for the probable
variation in recording standards, we use standardised data from
a reliable source.
Additionally, it is also important for us to use a measure that
has direct policy implications.
In the construction of MFP, which is derived as the residual of
the Cobb-Douglas equation,
the unit of MFP does not have a simple economic interpretation
and appears to be a modelling
artefact. The use of labour productivity in the modern sector
ensures the ability to derive
simple economic interpretation of the results that can inform
policymakers on innovation as
well as diversification-concerns.
The catch-up process in developing countries is dependent on
absorptive capacity. The
countries as such can induce catch-up and increases in labour
productivity by improving

education, R&D, business environment and governance.
Innovation policy is a broad term
and successful innovation is related to many systemic processes
working in sync. As such, we
acknowledge that defining the ideal combination of institutions
and policies that are
important for innovation is a complex task. We consider
innovation policies as those directed
at improving the innovative and absorptive capacity of the
countries. In this chapter
innovation policy is characterised by the interaction of
expenditures on education with the
24
effectiveness of government, the interaction of expenditures on
R&D with the effectiveness of
government and business policy. Our identification strategy
comprises five-year labour
productivity growth rates regressed as a function of initial
labour productivity, relevant lagged
innovation policy variables, control variables and dummy
variables.
The literature on innovation, growth and productivity,

innovation policies, education, R&D,
business, governance and the associated relationships is
discussed in Section 2.2. Our
identification strategy is drawn out in Section 2.3. The data are
presented in Section 2.4. The
results related to the effect of innovation policies in the global
context, as well as for developed
and developing countries are presented in Section 2.5. Finally,
we discuss the results, their
policy implications, and present our concluding remarks in
Section 2.6.
2.2. Innovation policies and the path towards successful
innovation
The innovation literature is distributed between “narrow” and
“broad” focus on innovation
policies. In the “narrow” sense, only formal R&D systems and
organizations systematically
active in knowledge generation and diffusion are the focus. An
example of the application of
the systems of innovation framework in the former sense is the
World Bank Knowledge
Assessment Methodology (Chen & Dahlman, 2005). However,
systems of innovation in a
narrow sense “leave significant elements of innovation-based

economic performance
unexplained” (Lundvall, 2007). In the “broad” sense the core
knowledge-producing and
disseminating institutions are embedded in a wider socio-
economic system, and the relative
success of innovation policies is a function of influences and
linkages beyond these core
institutions (Freeman, 2002; Soete, et al., 2010). Among the
works that discuss new-to-the-
world innovation in the latter sense, Furman, Porter and Stern
(2002) integrate ideas-driven
growth theory, microeconomics-based models of national
competitiveness and industrial
clusters theory. They consider R&D manpower, knowledge and
technology base as important
sources of innovation. Archibugi & Coco (2004) define
innovation system through patents,
publications, ICT, electricity consumption, and education. To
formulate a comprehensive
narrative, we draw from literature sources focused on individual
policy variables, governance,
25

policy interaction, growth, labour productivity, and innovation.
This conceptualisation is
carried out with the frame of reference that growth is primarily
driven by technological change
and innovation. The three main factors of growth are generally
considered to include MFP,
labour input, physical capital and human capital. Technology
growth and efficiency are
considered as the sub-sections of MFP. Efficiency improvement,
in the very least, need
management and process innovation. Together we term these
components as innovation. This
is the origin of the consideration that innovation and
technological change is the primary
contributor to economic growth (Solow, 1957; Denison, 1963;
Romer, 1986). At the same
time, Nelson and Winter’s (1982) work on the evolutionary
approach views the free-market
economic structure as continuously evolving with emphasis on
the influence of institutions
and government policies on economic activity.
Education is one of the policy variables that affect innovation.
Aghion et. al (2009) set out
to estimate causality of the effect of education on growth, using

actual measures of investment
in education. They question the adequacy of using lagged
spending – in their previous work
(Vandenbussche, et al., 2004) – as an instrument to overcomes
biases caused by omitted
variables such as institutions, especially in the case of small
low variation data. They show
that there are positive effects of exogenous increases in
education expenditure related to four
years’ tertiary education in the states of the United States of
America (US) that are close to
the world frontier (Aghion, et al., 2009). Krueger and Lindahl
(2001) find societal returns to
schooling in terms of increased growth in cross-country
analysis; the relationship is
statistically significant and positively associated with
subsequent growth for countries with
the lowest level of initial education.
Faster growing countries in Asia have had higher expenditures
on primary education. Keller
(2006) does not obtain positive significant results consistently
for the effect of such
investments on growth. However, it is suggested in the paper
that inefficiencies in resource

allocation of secondary and tertiary education expenditures may
be the reason behind. In
other studies, government expenditures on education relate
positively to growth in developing
countries (Bose, et al., 2007). Also, the inclusion of other
policy variables in the studies, such
26
as openness, public spending, and health variables results in a
lower estimated impact of
education on growth (Benos & Zotou, 2014). From these
studies, we conclude that education
should be considered as a part of “broad” policies for
innovation-based growth.
Loayza et al. (2005) find that regulatory burden reduces growth.
However, a higher quality
of institutional framework leads to the negative effects of
excessive regulation on growth to
be lessened. In a simple model Djankov et al. (2006) observe
the effect of business regulations
as represented by the doing business indicators while
considering the effect of initial level of

growth, and control variables and other determinants of growth
that include corruption, law
and order, the political system, primary and secondary school
enrolment, and civil conflict.
They find that going from the worst to the best quartile of
business regulation shows a 2.3%
increase in annual growth rate. They also observe that the
effects of improvement in primary
and secondary education from worse to better quartiles of policy
or output are significantly
lower than the effects of business regulation on growth rate.
Hanusch (2012) suggests that
regulations related to credit, contract enforcement, costs, time,
starting a business, registering
property, and protection of investors within the realm of
business policies are statistically
significantly related to economic growth.
Griffith and team (2004) find that R&D, as represented by
BERD, is statistically and
economically important in the catch-up process as well as for
stimulating innovation directly
and suggest that the social rate of return of R&D has been
underestimated in the literature
as many studies only focus on the US. A look into cross-country

labour productivity
differences due to investment in R&D reveals that R&D
investment has a significant positive
impact on productivity (Lichtenberg, 1993). Nadiri and Kim
(1996) find rates of returns of
domestic R&D expenditures to be in the range of 14 to 16% and
adding the effect of spill-
overs of international R&D spending for six (6) advanced
economies showed the returns to
be 23 to 26% varying amongst the countries. Hall, Mairesse,
and Mohnen (2010) in their
review of the econometric literature measuring the private and
social returns to R&D find
that the literature identifies private returns to R&D as strongly
positive, social returns to be
greater than private returns and public-funded R&D to be less
productive in terms of private
27
returns. In many research avenues, the incentives to invest in
R&D is determined on the basis
of private returns and not social returns. It is also observed that
despite having higher social

returns to R&D investments developing countries are not able to
achieve the maximum
potential in R&D. This may be due to inappropriate or
inadequate social policies (Griffith,
et al., 2004).
Jalilian, Kirkpatrick and Parker (2007) find that there is a
strong causal link between
government regulation, regulatory quality indices, and economic
performance. Other cross-
sectional studies also report causal effects of governance on
long-run income per capita, using
instrumental variables (Kaufmann & Kraay, 2002). Also, the
mechanism behind this causal
link has been examined and it has been pointed out that one
path through which government
effectiveness improves economic performance is by creating a
better investment environment
(Kirkpatrick, et al., 2006). It is likely that government
effectiveness translates into high
economic growth not only through the path of providing a good
investment environment but
also by creating a good environment for innovation policies to
be effective.
The common theme that emerges from the literature is that

policies work in coherence with
each other and have a combined and complementary effect on
growth and productivity. The
translation of policy to increased labour productivity growth
must go through the
governments’ ability to effectively convert inputs of policy into
innovative products and
services, as well as innovative management, production, and
marketing practices. In this
respect, non-traditional sector labour productivity is closely
associated with innovation, across
developed as well as developing countries. Most of the
literature referenced here is aimed at
determining the relationship between various policies and
growth measures such as GDP,
Income per Capita and Labour Productivity. In this chapter, we
try to study the relationship
between selected policies and innovation proxied by labour
productivity growth in the modern
sector. As such we are delving deeper into the relationship
between one of the proximate
causes of growth – technological change or innovation and some
of the fundamental causes of
growth – the policies and institutional settings that drive

growth. In this sense in the literature
we have discussed is relevant in two ways – one, in pointing out
the relationship of
28
fundamental causes of growth to growth itself; and the second,
by pointing out that there is
a gap in trying to understand the link between the fundamental
and proximate causes of
growth.
Figure 2.1 – Innovation Policy Framework Conditions
Figure 2.1 above represents our interpretation of how the flows
of knowledge enable an
increase in innovation. The innovation eco-system is thus
arranged into conditions, linkages,
the firms and the market itself. The increase in innovation is
linked to increasing labour
productivity through innovative management, design,
production, and marketing techniques.
The change in the state of these conditions is determined
through natural transformation and

29
policy. The education condition is affected by government
policies, such as government
financing of the tertiary education system, policies determining
graduate ratios in science and
technology fields, alignment to labour demand from the market,
university autonomy, and
others. Similarly, research and development conditions are
impacted by the government
expenditure on research and development, type of research
grants, targeted scientific field
grants, the competitiveness of grants, intellectual property
regime, and private-sector research
funding, and so forth. Business conditions are related to
industrial policies, competition policy,
entrepreneurship policy, taxation policy, financial policy, the
health of the financial sector,
availability of finance, and market access for firms that create
new products or services.
Infrastructure conditions include the availability of ICTs,
Transport, Energy, Standard-
Setting, Metrology, Security, among others. Finally, it is
considered that without efficient

and effective linkages the production of knowledge, as well as
transfer of knowledge for the
creation of new products and services, would be hampered. For
innovation to thrive in the
production space it is important that the innovation environment
conditions are healthy,
governed by sound policy, with effective linkages across
various conditions, the production
space and the market for consumption of the innovations.
2.3. Identification Strategy
We use the framework in Figure 2.1 above to understand policy
factors that promote
innovation. Consequently, we explore how individual
innovation policies and their interactions
influence innovation globally, in developed, and developing
countries. As such, labour
productivity growth in the non-traditional sector is modelled as
a function of innovation
policy and the effectiveness of innovation policy.
We assume the drivers of innovation to be: the initial l evel of
labour productivity, the
interaction of government effectiveness with educational
expenditures, the interaction of

government effectiveness with research and development and a
facilitative business
environment. We estimate the relationship with an Ordinary
Least Squares regression with
exogenous variation in explanatory variables of policy.
30
The response variable is defined as the natural log of the ratio
of final to initial labour
productivity in non-traditional sectors, where final labour
productivity is taken to be five
years after the initial measure. We use four years averages
starting from the initial year to
smoothen out one-off effects for the countries. The explanatory
variables are lagged one year
and include the natural logarithm of initial labour productivity,
interaction of government
effectiveness and government expenditures in tertiary education
as a percentage of GDP
(alternatively called effective tertiary education expenditures in
this chapter), interaction of
government effectiveness and gross expenditures on R&D as a

percentage of GDP
(alternatively called effective R&D expenditures in this chapter)
and index of economic
freedom. Innovation is a medium to long term phenomenon,
and innovation policies typically
take a long time to bear fruit. Using lagged average variables
accommodates for long term
nature of innovation and also provides a way to exclude reverse
causality.
The literature provides evidence that initial level of labour
productivity is a determinant of
labour productivity growth. As such, we account for the initial
level of labour productivity in
the estimation equation (Barro, 1991). Also, the initial level of
education has an impact on
how innovation policies influence the role of tertiary education
expenditures on innovation
itself (Keller, 2006). Natural resources and agricultural
endowments also influence the growth
path of a country (Lederman & Maloney, 2007). Finally, a
country’s regional situation
influences its growth trajectory as well (Moreno & Trehan,
1997). We introduce regional
dummies, educational attainment in terms of years of education

from primary to tertiary
level, natural resource rents as a percent of GDP, and
agricultural value added as a percent
of GDP as additional control variables. Total natural resource
rents as a percent of GDP is
defined as the sum of oil rents, natural gas rents, coal rents,
mineral rents, and forest rents
(World Bank, 2014). Agriculture in Agricultural value added
corresponds to International
Standard Industrial Classification (ISIC) divisions 1-5 and
includes forestry, hunting, and
fishing, as well as cultivation of crops and livestock production.
The estimation equation thus takes the form;
31
Equation 2.1: Δ tN-t1ln(labprod) = α0 + βo • labprod t1 + β1 •
goveff t1 • edu t1 + β2 • goveff t1 • r&d t1 + β3 •
econfreedom t1 + natresrents t1 + agrirents t1 + eduattain t1 +
regional dummies +
Table 2.1 – Variable Definitions
Variable Definition
ΔtN-t1 ln(labprod)

Productivity Growth
Natural log of the ratio of final to initial labour productivity in
non-
traditional sectors (alternatively including traditional; natural
resource and
agriculture sectors – see discussion in the main text)
labprod t1
Initial Productivity
Natural log of initial labour productivity
goveff t1 • edu t1
Effective Tertiary Education
Interaction of government effectiveness and government
expenditures on
tertiary education as a percent of GDP - initial
goveff t1 • r&d t1
Effective R&D
Interaction of government effectiveness and gross expenditures
on research
and development as a percent of GDP - initial
econfreedom t1
Economic Freedom

Index of economic freedom - initial
natresrents t1
Natural Resource Rents
Natural resource rents as a percentage of GDP - initial
agrirents t1
Agricultural Value Added
Agricultural value added as a percentage of GDP - initial
eduattain t1
Educational Attainment
Number of years of schooling from primary to tertiary level -
initial
Note: The subscript “t1” in Equation 2.1 and the reference
“initial” in Table 2.1 specifies the magnitude of the
variable during the initial year(s) considered. The subscript
“tN” in Equation 2.1 and the reference “final” in
Table 2.1 specifies the final year. As such the growth is
considered between t1 and tN. In this chapter, this
period of growth is 5 years and the policy variables are the
average of four years, lagged by one year from the
final year for which a five-year growth rate is considered.
In addition, we evaluate the same equation for labour
productivity growth including natural
resource rents and agricultural value added. This helps us
identify differences in the influence

of innovation policies on innovation-based growth versus mixed
innovation and traditional
sector growth and confirm the robustness of our results. We also
estimate the model for
developed and developing country groups separately to
understand the differences in the
influence of innovation policies and analyse the need for
varying policies for both the groups.
The 15-year data from 1998 to 2013 is regressed in three groups
of five years. The results for
32
each period are observed in order to understand period-specific
differences. These period-
specific differences are controlled-for through a period dummy
in the pooled dataset regression
that is aimed at generating a larger data set leading to
significant and robust coefficients.
2.4. Data
Labour productivity is calculated in terms of real GDP per
labour force. The labour
productivity indicator is constructed by using the GDP from

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