ECONOMIC PERFORMANCE THROUGH TIME: A GENERAL EQUILIBRIUM MODEL

This paper presents a simple general equilibrium model of economic performance through time. The model incorporates 4 main determinants of economic performance: technology, capital investment, the division of labor and institutions. It demonstrates that growth is not automatic even with technological progress. In order to maintain economic growth, it is important to continuously implement new technologies through capital investment. It also shows that institutional improvement promotes the social division of labour, which is an independent source of economic growth.