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Abstract This paper presents a post-Keynesian ecological macromodel, which is stock-flow consistent, and incorporates directed technological change. Private and public R&D spending across three competing, yet complementary inputs – Labor, Capital, and Resources – follow a portfolio allocation decision, where inputs with relatively higher growth in costs, see higher R&D investment and productivity gains. Two policy experiments are reported; a market-based Resource tax increase, and a centralized green policy, where public R&D budget is shifted towards Resource-saving technologies. We highlight that in the presence of labor market institutions, which give rise to hysteresis, and limited R&D budgets, a policy of continuous Resource tax growth is needed to induce Resource-saving technological change to achieve a greener economy. This needs to be coupled with planned government spending adjustment to spur demand and boost investment. The findings also suggest that a mix of market-based and centralized policies may be optimal. [ABSTRACT FROM AUTHOR]

The paper expands the BOP-constraint growth model and Kaldorian regimes (productivity and demand regimes) in order to include some of the concerns raised by ecological economics in post-Keynesian models for open economies. The demand regime is modified by taking into account Porter's hypothesis, which suggests that environmental innovations, spurred by environmental policies, can foster competitiveness. As a result, the equilibrium BOP-constrained rate of growth increases, leading to a different version of Thirlwall's Law, which opens room for analyzing the impact of environmental innovations on convergence between developing and developed economies. The productivity regime in turn considers the growth and employment implications of innovations in labor productivity (standard innovations) and environmental efficiency (environmental innovations). It is argued that the fiscal policy and composition of public expenditure matter for long run growth, employment and sustainability. [ABSTRACT FROM AUTHOR]