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1375.0 - Discussion Paper: Measuring a Knowledge-based Economy and Society - An Australian Framework, 2002  
Previous ISSUE Released at 11:30 AM (CANBERRA TIME) 28/08/2002   
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Contents >> Chapter 3: Approaches to the measurement of a Knowledge-based Economy/Society

NEED FOR A MEASUREMENT FRAMEWORK

There seems to be a growing acceptance that it is important to try and measure the knowledge-based economy (and perhaps to a lesser extent society). ABS believes that in order to present a coherent statistical picture of knowledge in an economic and social context, relevant statistics should be shown within a framework which is:

  • structured in a logical and understandable manner
  • developed in the light of relevant theory and empirical evidence
  • widely accepted by policy makers and other users
  • unbiased in its choice of statistical indicators so that, for instance, it does not show a group of indicators selected to suit a particular purpose or argument
  • comprehensive whether or not relevant statistics exist for all framework elements (thus enabling any gaps in available statistics to be readily identified).


TYPE OF FRAMEWORK

A traditional statistical (or conceptual) framework can perhaps be viewed as a conceptual map which allows statistics to be organised and logically grouped. A statistical framework would typically deal with a particular topic and would include a range of rules and conceptual information such as classifications, standards, definitions and actors. The framework presented in this paper differs from a traditional statistical framework in two ways. The first, and most obvious, is that its scope is very wide so that component parts would themselves be the subject of statistical frameworks (some of which already exist). A second difference is that the proposed framework does not deal with concepts, such as classifications, standards or definitions, leaving these to be dealt with by statistical frameworks on component topics (for example, a statistical framework for education and training statistics or information technology and telecommunication statistics).

For these reasons, the proposed framework presented here could perhaps be better viewed as a 'descriptive' or 'presentation' framework (its defining characteristic being that it attempts to describe a subject using statistics rather than trying to view those statistics within the context of a statistical or conceptual framework).

Suite-of-indicators

In the approach adopted in this framework, a suite of indicators which collectively describe the subject (i.e. the KBE/S) have been assembled and grouped according to particular aspects of the subject. This could be referred to as a 'suite-of-indicators' approach and is the one chosen by most agencies which have presented data on the KBE.


A SINGLE INDEX?

Once a set of indicators has been decided upon, it is theoretically possible to create an index to reflect the intensity with which an economy and society is knowledge-based. The use of a single figure index, if valid, would facilitate comparative analyses and could become an important indicator of economic performance. However, before an index can be developed, each indicator would require an appropriate weight to be assigned to it. This in turn relies on the existence of a sound and generally agreed model which defines and prioritises key elements of a KBE/S. As Mohnen & Dagenais (1998) noted, a major obstacle to constructing an index from a compilation of survey data is how to combine various measures of the same concept. This problem is compounded when the index is used over time, as the framework on which it is based needs to change in order to remain relevant. ABS does not intend to pursue this approach, arguing that a single index would present an over-simplified and possibly misleading representation of the extent to which an economy or society is knowledge-based.


DIRECT MEASUREMENT APPROACH

Measuring knowledge in accordance with the economy wide input/output framework has also been suggested as an area for consideration. Such an approach, while quite distinct from that proposed here, could also aid analysis of economic growth. Statistics for the traditional sectors for inputs and outputs of knowledge would need to be developed. Linkages between these sectors could then be analysed for the degree of knowledge transfer and dependence. A number of conceptual and methodological challenges would need to be overcome if this approach were to be pursued.


EXISTING FRAMEWORKS

Various compilations of KBE statistics have been developed, many of which are based on the 1996 OECD definition of a KBE. Some are more heavily focussed on information and communications technology (ICT) as the main driver of growth in a KBE. Others acknowledge ICT as an enabling technology of a KBE, but also encompass other factors as contributing to economic growth (e.g. employee skill levels, knowledge creation in the form of R&D and innovation, knowledge and technology transfer).

While most of these compilations could probably be described as 'descriptive frameworks', the majority are implicit rather than explicit frameworks. That is, the framework is defined in terms of the statistics which it presents rather than being derived on the basis of theory or empirical evidence. A notable exception to this is the APEC Economic Committee's 2000 KBE framework which is described in more detail later in this Chapter. It is based on empirical evidence.

Listed below are examples of existing KBE compilations. References for these can be found in the Bibliography.
  • Australia as a Modern Economy: Some Statistical Indicators 2002, Department of Industry, Tourism and Resources (2002)
  • The 2002 State New Economy Index, Progressive Policy Institute (2002)
  • Science, Technology and Industry Scoreboard: Towards a Knowledge-based Economy, OECD (2001)
  • Knowledge Assessment Scorecard, World Bank Institute (2002)
  • On the Road to the Finnish Information Society III, Statistics Finland (2001)
  • UK Competitiveness Indicators: Second Edition, UK Department of Trade and Industry (2001)
  • The New Economy and APEC, APEC Economic Committee (2001)
  • Towards Knowledge-based Economies in APEC, APEC Economic Committee (2000)
  • Knowledge-Based Activities: Selected Indicators, Department of Industry, Science and Resources (2000)
  • Towards a European Research Area: Science, Technology and Innovation: Key Figures 2000, Eurostat (2000)
  • European Innovation Scoreboard, European Commission (2000)
  • Porter's Index of Innovative Activity. (1999)
  • The Knowledge-Based Economy: A Set of Facts and Figures, OECD (1999)
  • Our Competitive Future: UK Competitiveness Indicators 1999 UK Department of Trade and Industry (1999)
  • Measuring the Knowledge-Based Economy: How does Australia compare? Department of Industry, Science and Resources (1999)
  • Index of the Massachusetts Innovation Economy, Massachusetts Technology Collaborative (1999)
  • The New Economy Index: Understanding America's Economic Transformation, Progressive Policy Institute (1998).


APEC FRAMEWORK

The APEC framework was developed as part of a project commissioned by the APEC Economic Committee in mid-1999. The title of the project was Towards Knowledge-based Economies in APEC and was progressed by a specially created KBE Task Force, members of which included Australia, Canada and Korea. The aim of the project was to "provide the analytical basis useful for promoting the effective use of knowledge, and the creation and dissemination of knowledge among APEC economies" (APEC Economic Committee 2000). A brief summary of the methodology used to develop the framework is presented here. For more information, the full report should be examined.

The project entailed the examination of empirical evidence and concluded that economic growth is most sustainable for those economies which are strong in all of the following four dimensions (findings of the OECD Growth Project, analysed and cited in the APEC Economic Committee report):
  • 'Innovation and technological change are pervasive, and are supported by an effective national innovation system.'
  • 'Human resource development is pervasive: education and training are of a high standard, widespread and continue throughout a person's working life.'
  • 'An efficient infrastructure operates, particularly in information and communications technology (ICT), which allows citizens and businesses to readily and affordably access pertinent information from around the world.'
  • 'The business environment is supportive of enterprise and innovation.'

These four dimensions form the basis of the APEC KBE framework:
  • Innovation System
  • Human Resource Development
  • ICT Infrastructure
  • Business Environment.

Drawing on the literature, in particular on a paper by Gera et al (1998), the KBE Task Force developed the concept of a fully developed KBE and described the characteristics of such an economy. Once the characteristics of a KBE were described, quantitative measures (or indicators) of these characteristics could then be selected to incorporate objective measures into the framework. For the purposes of the APEC report (APEC Economic Committee 2000), it was important that the chosen indicators were available for all the case study economies. This tended to limit the choice of indicators.


OECD CONTRIBUTION

The OECD has made a significant contribution to research on the Knowledge-based economy. Its work has evolved from a long history of developing and publishing science and technology indicators. In 1996, the OECD published The Knowledge-based Economy (OECD 1996), an early attempt to compile statistical indicators on the KBE. It published another compilation in 1999 (OECD 1999) and in 2000 started releasing results from the two-year Growth Project. The impetus for the project was to discover the causes underlying differing economic growth of member nations during the 1990s.

The final Growth Project report, The New Economy: Beyond the Hype (OECD 2001b), was released in mid 2001. Even though its findings have been described in some detail in the previous chapter, it is worth summarising the policy conclusions which flowed from the project. The report emphasised:
  • the importance of a stable and open macro-economic environment with effectively functioning markets;
  • the diffusion of ICT;
  • fostering innovation;
  • investing in human capital; and
  • stimulating firm creation.

Those policy conclusions, based on empirical evidence, suggest the broad elements of a descriptive KBE framework. The ABS proposal described in this paper and the APEC framework have used those elements in their respective frameworks


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