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An extended Goodwin model with endogenous technical change and labor supply

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  • Cajas Guijarro, John

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.

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  • Cajas Guijarro, John, 2024. "An extended Goodwin model with endogenous technical change and labor supply," Structural Change and Economic Dynamics, Elsevier, vol. 70(C), pages 699-710.
    • Handle: RePEc:eee:streco:v:70:y:2024:i:c:p:699-710
    DOI: 10.1016/j.strueco.2024.06.004
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    More about this item

    Keywords

    Goodwin model; Endogenous technical change; Induced innovation through mechanization; Endogenous labor supply; Hopf bifurcation;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • E11 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Marxian; Sraffian; Kaleckian
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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