Evidence on Goodwin cycles across US golden age and neoliberal era

Jose Barrales-Ruiz, Codrina Rada and Rudiger von Arnim
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Jose Barrales-Ruiz: Center of Economics for Sustainable Development (CEDES), Faculty of Economics and Government, Universidad San Sebastian, Chile
Rudiger von Arnim: Department of Economics, University of Utah, USA

No 2410, Working Papers from New School for Social Research, Department of Economics

Abstract: This paper provides a set of baseline empirical results on Goodwin cycles for the US post-war macroeconomy. Our sample consists of Hamilton-filtered series for nonfarm business sector output and labor share as well as the employment rate. Vector autoregressions (VARs) yield strong evidence for the Goodwin mechanism, i.e. profit-led activity and profit-squeeze distribution, in two (output or employment rate cycle vs. labor share cycle) and three (output, employment rate and labor share cycles) dimensions. We focus solely on the cycle rather than underlying trends, discuss how theory and empirical methods relate, and investigate whether and how the Goodwin mechanism has changed over time. To do so, we estimate split samples with standard recursive VARs for the 'golden age' (GA) and 'neoliberal era' (NE), as well as time-varying parameter VARs. Results indicate (i) overall a persistence of the Goodwin mechanism over the entire post-war period; but (ii) generally less pronounced cyclicality during NE than GA, and (iii) a weakening of the profit squeeze vis-`a-vis the employment rate over time as well as, on balance, a weakening of the profit led regime of both activity variables.

Keywords: Neo-Goodwinian empirics; cyclical growth (search for similar items in EconPapers)
JEL-codes: E12 E25 E32 J50 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2024-07
New Economics Papers: this item is included in nep-his, nep-hme, nep-lab and nep-pke
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