The Missing Index of the Knowledge Economy

A reflection from 2012 — still relevant today

I came across these notes I wrote back in March 2012, prompted by a simple question from a talented young woman: Do we have a Knowledge Index for Albania?

At the time, I was surprised that I could not find such an indicator in our national statistics. I looked instead at the World Bank’s Knowledge Assessment Methodology and at the broader indicators related to education, innovation, institutions, human capital and ICT.

Fourteen years later, the question remains remarkably relevant.

We have moved forward in many ways. Yet the fundamental challenge remains: How do we measure our capacity to create, absorb, use and disseminate knowledge—and how do we know whether we are improving?

A country cannot build a knowledge economy simply by speaking about innovation, digitalisation or human capital. It needs to know where it stands, what its weaknesses are, and whether its policies are actually changing the indicators that matter.

That is why I am bringing this 2012 reflection back to attention today.

Perhaps some of the terminology and data are now dated. The question, however, may be even more important today than it was then.

Can Albania become one of those small countries from which even larger countries come to learn?

That was the dream I wrote about in 2012.

I still believe it is worth pursuing.

Indeksi i munguar i Ekonomisë së Dijes

I wrote these notes following a question from a talented young woman—highly demanding of herself, deeply committed to learning, and constantly seeking new knowledge and ways to update her skills. She asked me whether I had any data on a Knowledge Index for our country.

To tell the truth, although I had been increasingly involved in this field in those years, I had not come across such an indicator, just as I had not encountered many others, in our national statistics.

Since she had already conducted her own research, I recommended that she consult the World Bank website, which she had already visited, as well as the Human Development Report and the Literacy Index, one of the indicators associated with the Millennium Development Goals. In my view, these sources would indirectly lead her towards this missing indicator.

It is well known that the World Bank has developed one of the broadest international databases of comparable indicators, covering the main economic and social variables relevant to assessing a knowledge-based society.

In 2009, it applied the Knowledge Assessment Methodology (KAM), which collected data for 146 countries using 109 qualitative and structural indicators. These were made available through an interactive tool that allowed users to select and aggregate the available data in different ways.

The variables were selected to represent four pillars considered fundamental to the knowledge economy, making it possible to assess the competitiveness of different national systems.

These four pillars are:

1. An economic incentive and institutional regime capable of providing sound economic policies and effective institutions, allowing the efficient use of resources and encouraging creativity, as well as the use and dissemination of existing and newly created knowledge.

2. An efficient innovation system, formed by enterprises, research centres, universities and other organisations capable of contributing to the creation of global knowledge, as well as its assimilation and adaptation to local needs.

3. An educated population, providing a workforce with high levels of education and competencies, capable of using and sharing knowledge with others and creating new knowledge.

4. A modern and appropriate information infrastructure, based on the dissemination of information and communication technologies, facilitating the efficient creation, implementation and dissemination of information.

Each of these four pillars included three areas, composed of a subset of indicators considered significant for assessing two types of indices.

The Knowledge Economy Index (KEI) was intended to measure the ability of different countries to compete within a modern knowledge economy.

Among the indicators included in the KEI, and which I considered particularly relevant for Albania, were:

(1) Tariff and non-tariff barriers, measuring the level of economic freedom;

(2) Regulatory quality, measuring the incidence of policies that are not market-friendly, including price controls, inadequate banking supervision and the perception of excessive burdens in areas such as foreign trade and entrepreneurship;

(3) Rule of law, measuring the level of confidence in and acceptance by economic actors of the rules governing society, including the perception and incidence of violent and non-violent crime, as well as the effectiveness and security of the law in relation to contracts.

The Knowledge Index (KI), meanwhile, measured “the ability of a country to generate, adapt and disseminate knowledge”. It represented the overall knowledge potential of a given country and was independent of the political and institutional factors that could either facilitate or constrain it.

The Knowledge Economy Index according to the World Bank

The table below shows the share of world high-technology exports by regions and countries in 2005.

And here is the framework developed by the World Bank to describe and arrive at these indicators.

From all this, the need to build a contemporary vision for assessing and producing knowledge becomes clear.

The inability to measure ourselves against others should, in this case, serve first as an obligation to develop these indicators and obtain a realistic picture of our situation at a given moment.

But even more importantly, it should become a continuous objective: to update and improve these indicators over time.

This would allow us to identify the weaknesses of our system and, in turn, make the necessary improvements.

In this way, our schools and our practices could eventually make us visible not only in our national statistics, but also in the statistics of high-technology exports—just as happens in other countries that are as small as Albania in size and population, but much more structured than we are.

We already have positive examples showing that a school in a small country can export talent. We see it in ballet, in opera, and in instrumental music.

We can very well become one of those small countries from which even larger countries come to learn.

Let this be our dream.

To make it a reality requires a great deal of work, effort and sweat. It requires ambitious young people, curious minds and people full of dreams who want to make Albania a better place.

Luiza Hoxhaj

Tirana, 22 March 2012