Links between Knowledge Variables and Development Variables

Three key variables serve as proxies for each Knowledge Economy pillar: Economic Incentive and Institutional Regime, Education, Innovation, and Information & Communications Technology (ICT).

Knowledge Index (KI) is the simple average of the normalized country scores on the key vari­ables in three pillars - education, innovation and ICT. Knowledge Economy Index (KEI) measures performance on all four pillars.

The scorecards demonstrate comparative per­formance - the variables are normalized on a scale from 0 to 10 relevant to four possible comparison groups - all countries, region and income groups (Table 2).

If a country performs worse over time on a certain normalized variable, this may be because it actually has lost ground in absolute terms, or improved slower than the comparative group (Table 3).

For the Arab countries, the most recent data about the Knowledge Economy Index shows the existence of a different pattern compared to the state of affairs in the EEE region (Table 4).

While in the EEE region, the countries have almost the same performances in terms of knowl­edge economy indicators, in the Arab countries the degree of homogeneity is significantly lower. Thus, a country like Israel is similar to Estonia, ranked on the first place in EEE region accord­ing to these indicators, while most of the Arab countries have very low values for knowledge economy variables.

One way to assess the relationship between the knowledge economy indicators and economic

Table 2. Knowledge economy variables for EEE region

Source: World Bank

Table 3.

Source: World Bank

Table 4. Knowledge economy variables for Arab region

Source: World Bank

development is to build-up a panel data regression model, in order to explain real economic growth as a function of these knowledge related factors.

2.