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Pseudo-Goodwin cycles in a Minsky model
- Source :
- Cambridge Journal of Economics. 41:105-125
- Publication Year :
- 2016
- Publisher :
- Oxford University Press (OUP), 2016.
-
Abstract
- Goodwin cycles result from the dynamic interaction between a profit-led demand regime and a reserve army effect in income distribution. The paper proposes the concept of a pseudo-Goodwin cycle. We define this as a counter-clockwise movement in output and wage share space which is not generated by the usual Goodwin mechanism. In particular, it does not depend on a profit-led demand regime. As a demonstration, a simple Minsky model is extended by adding a reserve army distribution adjustment mechanism. The wage share responds positively to output but generates no feedback. In the augmented Minsky model, cycles are generated purely through the interaction between financial fragility and demand. By design, demand is not influenced by changes in income distribution. But the model does exhibit a pseudo-Goodwin cycle in the output-wage share space. This holds true even if a wage-led demand regime is introduced. This demonstrates that the existence of a counter-clockwise movement of output and the wage share cannot be regarded as proof of the existence of a Goodwin cycle and a profit-led demand regime.
- Subjects :
- Economics and Econometrics
050208 finance
media_common.quotation_subject
05 social sciences
Wage
Financial fragility
jel:E32
jel:E11
Post-Keynesian economics
jel:E12
Profit (economics)
Microeconomics
Income distribution
0502 economics and business
Business cycle
Economics
Business cycles, Goodwin cycle, Minsky cycle, financial fragility, distribution cycles, Post Keynesian economics
Wage share
050207 economics
media_common
Subjects
Details
- ISSN :
- 14643545 and 0309166X
- Volume :
- 41
- Database :
- OpenAIRE
- Journal :
- Cambridge Journal of Economics
- Accession number :
- edsair.doi.dedup.....2b9078a7e2bca0007a57bce6bb373547