An extended Goodwin model with endogenous technical change and labor supply

John Cajas Guijarro

Structural Change and Economic Dynamics, 2024, vol. 70, issue C, 699-710

Abstract: This paper extends the Goodwin model of distributive cycles by incorporating the simultaneous endogeneity of technical change and labor supply within a classical-Marxian framework. It reinterprets induced innovation, suggesting that firms optimize mechanization to maximize cost reduction, obtaining a micro-founded relationship between mechanization and the wage share. Additionally, it assumes a positive relationship between labor supply and the employment rate. The resulting three-dimensional dynamical system includes wage share, employment rate, and capital-output ratio as state variables. The Hopf bifurcation theorem reveals the emergence of limit cycles as the employment rate's effect on labor productivity (reserve-army-creation effect) approximates a critical value from below. Numerical simulations for 10 OECD countries illustrate the cyclical nature of the model and its consistency with empirical patterns. Furthermore, a sensitivity analysis explores the effect of parameters variations, emphasizing the social dimensions of productivity and labor supply as critical factors defining the stability of distributive cycles.

Keywords: Goodwin model; Endogenous technical change; Induced innovation through mechanization; Endogenous labor supply; Hopf bifurcation (search for similar items in EconPapers)
JEL-codes: C61 E11 E32 O33 O41 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:streco:v:70:y:2024:i:c:p:699-710

DOI: 10.1016/j.strueco.2024.06.004

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