WAGES, PROFITABILITY, AND GROWTH IN A SMALL OPEN-ECONOMY

Issues raised by the evolution of a rapidly growing small economy from a labor-intensive, low-technology production base to a capital-intens ive, high-technology, knowledge-and-skill-intensive emphasis as it app roaches the limits of its resource constraints in the labor market are examined. A model of endogenous growth for a small open economy that is driven by increases in labor productivity from learning-by-doing an d that allows for the dynamic acquisition of comparative advantage is developed. In this framework the effects of policies and exogenous sho cks on the direction and pace of restructing are investigated.