Uncertainty and Contradiction: An Essay on the Business Cycle

Michalis Nikiforos ()
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Michalis Nikiforos: Levy Economics Institute

No 1514, Working Papers from New School for Social Research, Department of Economics

Abstract: The paper develops a model of economic fluctuations in the medium run and their relation with the short-run macroeconomic equilibrium. The business cycle is the result of two separate forces. On the one hand, there is the Harrodian instability. On the other hand, this instability is contained by the inherent contradictions of capitalism. We focus on two of these contradictions, the profit-squeeze that results from the tightening of the labor market as employment and utilization increase and the financial instability hypothesis, as formulated by Hyman Minsky. With the inclusion of overhead labor, the model can explain the U-shaped behavior of the wage share along the business cycle (wage share decreases for low levels of utilization and increases for higher levels) that prevailed in most of the post-WWII period, as well as the decrease in the wage share as utilization increases that has been observed in the most recent cycles.

Keywords: Cycles; Harrod; Oscillations; Distribution; Minsky (search for similar items in EconPapers)
JEL-codes: B22 E11 E12 E32 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2015-06
New Economics Papers: this item is included in nep-mac and nep-pke
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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