Distributive and Demand Cycles in the Us Economya Structuralist Goodwin Model

Abstract

There are regular counterclockwise cycles involving capacity utilization u (horizontal axis) and the labor share b (vertical axis) in the US economy since 1929. As in Goodwin's cyclical growth model, b can be interpreted as a Lotka-Volterra predator variable and u as prey. In a phase diagram, dynamics around the u=0 schedule respond to effective demand that econometric estimation (1948-2002) shows to be profit-led. Distributive dynamics around the b=0 curve demonstrate a long-term profit squeeze. Across cycles, the real wage and labor productivity grow at 0.57 per cent per quarter, holding the labor share broadly stable. Modeling the cycle in the (u, b) plane provides a parsimonious description of demand and distributive dynamics, consistent with the macroeconomics embedded in the work of Kalecki, Steindl, Goodwin and many subsequent authors.