The empirical relevance of Goodwin’s business cycle model for the US economy
AbstractThe 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.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 21012.
Date of creation: 26 Feb 2010
Date of revision:
Business cycle; Goodwin; Econometrics; Marxian Economics; Post Keynesian Economics; Functional income distribution;
Find related papers by JEL classification:
- E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
- E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
- E11 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Marxian; Sraffian; Institutional; Evolutionary
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-03-20 (All new papers)
- NEP-BEC-2010-03-20 (Business Economics)
- NEP-MAC-2010-03-20 (Macroeconomics)
- NEP-PKE-2010-03-20 (Post Keynesian Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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