A Dynamical Model of Business-Cycle Asymmetries:Extending Goodwin

D Harvie, M A Kelmanson and D G Knapp

Economic Issues Journal Articles, 2007, vol. 12, issue 1, 53-92

Abstract: A rarely noted, economically unrealistic feature of Goodwins (1967; 1972) celebrated growth-cycle model is that its state variables, the wage share of output and the employment proportion, can exceed unity. We propose a novel extension of the two-variable dynamical system which ensures that its solutions remain within the economically feasible region, i.e. the unit square of the wage share employment proportion phase plane. In a further extension, we obtain a model which, besides possessing a richer economic interpretation than the original, is able to generate asymmetric solution cycles. We use numerical techniques to investigate the new models properties; in particular, we examine business-cycle deepness and steepness.

Date: 2007
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