The effect of technological change on economic performance in a post-Keynesian small open economy model

This study explores the impact of increases in the rate of productivity growth on various measures of economic performance: the growth rate, the trade balance and real competitiveness, the terms of trade, and the employment rate. A post-Keynesian small open economy model under flexible exchange rates and perfect capital mobility is analyzed and the conditions for dynamic stability presented in detail. We find that increases in the rate of productivity growth improve the terms of trade and increase the economy's growth rate. In a neo-Keynesian closed economy model increases in the rate of productivity growth are shown to increase the employment rate (under restricted behavior of labor unions), while in a neoclassical growth model under fixed exchange rates they will increase the growth rate if wealth exceeds the value of the capital stock in the economy.