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Profit-driven and demand-driven investment growth and fluctuations in different accumulation regimes

Author

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  • Giovanni Dosi

    ()

  • Mauro Sodini

    ()

  • Maria Virgillito

    ()

Abstract

The main task of this work is to develop a model able to encompass, at the same time, Keynesian, demand-driven, and Marxian, profit-driven, determinants of fluctuations. Our starting point is the Goodwin model ( 1967 ), rephrased in discrete time and extended by means of a full coupled dynamics structure. The model adds the combined interaction of a demand effect, which resembles a rudimentary first approximation to an accelerator, and of a hysteresis effect in wage formation in turn affecting investments. Our model yields “business cycle” movements either by means of persistent oscillations, or chaotic motions. These two different dynamical paths accounting for the behaviour of the system are influenced by its (predominantly) profit-led or demand-led structures. Copyright Springer-Verlag Berlin Heidelberg 2015

Suggested Citation

  • Giovanni Dosi & Mauro Sodini & Maria Virgillito, 2015. "Profit-driven and demand-driven investment growth and fluctuations in different accumulation regimes," Journal of Evolutionary Economics, Springer, vol. 25(4), pages 707-728, September.
  • Handle: RePEc:spr:joevec:v:25:y:2015:i:4:p:707-728
    DOI: 10.1007/s00191-015-0406-8
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    References listed on IDEAS

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    1. Medio,Alfredo & Gallo,Giampaolo, 1995. "Chaotic Dynamics," Cambridge Books, Cambridge University Press, number 9780521484619.
    2. Mauro Napoletano & Giovanni Dosi & Giorgio Fagiolo & Andrea Roventini, 2012. "Wage Formation, Investment Behavior and Growth Regimes: An Agent-Based Analysis," Revue de l'OFCE, Presses de Sciences-Po, vol. 0(5), pages 235-261.
    3. David G. Blanchflower & Andrew J. Oswald, 1995. "The Wage Curve," MIT Press Books, The MIT Press, edition 1, volume 1, number 026202375x, March.
    4. S. Sordi, 1999. "Economic models and the relevance of “chaotic regions”:An application to Goodwin's growth cycle model," Annals of Operations Research, Springer, vol. 89(0), pages 3-19, January.
    5. M. Kalecki, 1949. "A New Approach to the Problem of Business Cycles," Review of Economic Studies, Oxford University Press, vol. 16(2), pages 57-64.
    6. Paul A. Samuelson, 1939. "A Synthesis of the Principle of Acceleration and the Multiplier," Journal of Political Economy, University of Chicago Press, vol. 47, pages 786-786.
    7. J. Barkley Rosser, 1999. "On the Complexities of Complex Economic Dynamics," Journal of Economic Perspectives, American Economic Association, vol. 13(4), pages 169-192, Fall.
    8. Dosi, Giovanni & Fagiolo, Giorgio & Roventini, Andrea, 2010. "Schumpeter meeting Keynes: A policy-friendly model of endogenous growth and business cycles," Journal of Economic Dynamics and Control, Elsevier, vol. 34(9), pages 1748-1767, September.
    9. Fanti, Luciano & Gori, Luca & Sodini, Mauro, 2012. "Nonlinear dynamics in a Cournot duopoly with relative profit delegation," MPRA Paper 37834, University Library of Munich, Germany.
    10. Giovanni Dosi & Christopher Freeman & Richard Nelson & Gerarld Silverberg & Luc Soete (ed.), 1988. "Technical Change and Economic Theory," LEM Book Series, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy, number dosietal-1988, August.
    11. Bhaduri, Amit & Marglin, Stephen, 1990. "Unemployment and the Real Wage: The Economic Basis for Contesting Political Ideologies," Cambridge Journal of Economics, Oxford University Press, vol. 14(4), pages 375-393, December.
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    13. Yoshida, Hiroyuki & Asada, Toichiro, 2007. "Dynamic analysis of policy lag in a Keynes-Goodwin model: Stability, instability, cycles and chaos," Journal of Economic Behavior & Organization, Elsevier, vol. 62(3), pages 441-469, March.
    14. Louca, Francisco, 2001. "Intriguing Pendula: Founding Metaphors in the Analysis of Economic Fluctuations," Cambridge Journal of Economics, Oxford University Press, vol. 25(1), pages 25-55, January.
    15. Bischi, Gian-Italo & Stefanini, Luciano & Gardini, Laura, 1998. "Synchronization, intermittency and critical curves in a duopoly game," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 44(6), pages 559-585.
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    Cited by:

    1. Dosi, G. & Pereira, M.C. & Roventini, A. & Virgillito, M.E., 2017. "When more flexibility yields more fragility: The microfoundations of Keynesian aggregate unemployment," Journal of Economic Dynamics and Control, Elsevier, vol. 81(C), pages 162-186.
    2. Fanti, Lucrezia, 2018. "An AB-SFC Model of Induced Technical Change along Classical and Keynesian Lines," MPRA Paper 86929, University Library of Munich, Germany.
    3. Lucrezia Fanti, 2018. "An AB-SFC Model of Induced Technical Change along Classical and Keynesian Lines," Working Papers 3/18, Sapienza University of Rome, DISS.
    4. Fanti, Lucrezia, 2018. "An AB-SFC Model of Induced Technical Change along Classical and Keynesian Lines," MPRA Paper 86645, University Library of Munich, Germany.

    More about this item

    Keywords

    Endogenous growth; Business cycles; Investment; Predator-prey dynamics; Aggregate demand; Accelerator; Complex systems; Non-linearity; Chaos theory; E32; E11; E12; E17;

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E11 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Marxian; Sraffian; Kaleckian
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian
    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications

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