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PETER FLASCHEL, ALFRED GREINER & SIGRID LUCHTENBERG

The paper formulates for a small open economy a macrodynamic framework with an employer of ‘first’ resort, added to a competitive economic reproduction process. There is high labor mobility, with fluctuations of employment made socially acceptable through a second labor market where all remaining workers get occupation and income. We show that this economy exhibits an attracting balanced growth path, which is also viable. Moreover, pension-fund financed investment can be added to this model without disturbing this situation. We also investigate the existence of skill differentials and a corresponding educational system, which includes the equal opportunity principle.