Pseudo, or not? Neo-Goodwinian growth cycles with financial linkages

Rudiger von Arnim and Luis Felipe Eick

Working Paper Series, Department of Economics, University of Utah from University of Utah, Department of Economics

Abstract: Barbosa-Filho and Taylor (2006) propose a theoretical model with the Goodwin mechanism (profit-led economic activity and profit-squeeze distribution of income) that generates the Goodwin pattern (a counter-clockwise cycle in activity-labor share space), which fits data well. Stockhammer and Michell (2017) investigate a three-dimensional model in output, labor share and firms' debt, and demonstrate that the inclusion of the financial linkage produces the Goodwin pattern in simulations even if demand is not profit-led (or weakly wage-led). This paper extends neo-Goodwinian theory to include the valuation ratio q. In two different models, we corroborate that the Goodwin pattern can indeed arise in simulations without profit-led demand when a financial linkage is present. Further, the Keynesian distributive cycle theory we build on clearly distinguishes between short run (usually profit-led) cycles, and a long run (potentially wage-led) steady state. In the two models discussed here, redistribution has no steady state effects.

Keywords: Goodwinian theory; cyclical growth, growth and distribution. JEL Classification: E12, E25, E32, J50. (search for similar items in EconPapers)
Pages: 31 Pages
Date: 2025
New Economics Papers: this item is included in nep-fdg, nep-lab and nep-pke
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