Knowledge Based Economy

ECONOMICS
Knowledge Based Economy
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Knowledge Based Economy
There is no universally accepted definition with regards to knowledge economy in the
existing literature. However, as per Oxford dictionary, knowledge economy is referred to as
economy where the economic growth is contingent to aspects such as quality, quantity and
information accessibility unlike traditional economies where means of production are
considered vital. OECD highlights that while technology and knowledge have played a vital
role in economic development but knowledge based economy recognises the same. In this
regards, Drucker highlights that in a knowledge based economy, the key resource is
knowledge with the workforce comprising predominantly of knowledge workers (Nurunnabi,
2017).
Main Features
In a knowledge based economy, the key drivers of productivity tend to be knowledge and
information which tend to act as the focal points. This is sharply in contract with the
traditional economy where factors of production such as labour, capital attract major
attention. There is investment in industries related to high technology. A knowledge based
economy is also characterised by service sectors that are knowledge intensive such as
communications, IT and education. Also unlike capital which gets used up, knowledge is
boosted through sharing considering that it is a non-definite resource (Mankiw, 2016).
Further, in a knowledge driven economy, the demand for highly skilled labour increases
coupled with educational institutions which tend to provide training in this regard ensuring
sustainable growth. The labour market tends to witness rapid and dramatic changes coupled
with increased focus on automation. Besides, the contribution of the service sector in the
GDP also is higher in case of knowledge based economy as the traditional sectors such as
agriculture and manufacturing is given less importance. Further, in these sectors also, there is
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