The empirical relevance of Goodwin’s business cycle model for the US economy

Artur Tarassow ()

MPRA Paper from University Library of Munich, Germany

Abstract: The paper attempts to verify Richard Goodwin's (1967) endogenous business cycle theory which states that the driving forces behind fluctuations are class struggles between capitalists and workers about income distribution. Based on a Marxian profit-led model, non-linear differential equations lead to endogenous cycles in the wage-share-employment-space which can be observed empirically. Applying a bivariate vector autoregressive model we analyze the relationship between real unit labor costs and the employment rate for the US economy over a period from 1948:1 to 2006:4. Granger-causality tests, orthogonalized impulse response functions and forecast error variance decomposition are conducted for the raw data as well as the cyclical components of the Hodrick-Prescott and Baxter-King filter methods. We verify the profit-led character of the US goods market and find that income distribution is driven by labor market dynamics.

Keywords: Business cycle; Goodwin; Econometrics; Marxian Economics; Post Keynesian Economics; Functional income distribution (search for similar items in EconPapers)
JEL-codes: E11 E12 E24 E25 E32 (search for similar items in EconPapers)
Date: 2010-02-26
New Economics Papers: this item is included in nep-bec, nep-mac and nep-pke
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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https://mpra.ub.uni-muenchen.de/22271/1/MPRA_paper_22271.pdf revised version (application/pdf)

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