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Uncertainty and Contradiction: An Essay on the Business Cycle

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  • Michalis Nikiforos

    () (Levy Economics Institute)

Abstract

The paper develops a model of economic fluctuations in the medium run and their relation with the short-run macroeconomic equilibrium. The business cycle is the result of two separate forces. On the one hand, there is the Harrodian instability. On the other hand, this instability is contained by the inherent contradictions of capitalism. We focus on two of these contradictions, the profit-squeeze that results from the tightening of the labor market as employment and utilization increase and the financial instability hypothesis, as formulated by Hyman Minsky. With the inclusion of overhead labor, the model can explain the U-shaped behavior of the wage share along the business cycle (wage share decreases for low levels of utilization and increases for higher levels) that prevailed in most of the post-WWII period, as well as the decrease in the wage share as utilization increases that has been observed in the most recent cycles.

Suggested Citation

  • Michalis Nikiforos, 2015. "Uncertainty and Contradiction: An Essay on the Business Cycle," Working Papers 1514, New School for Social Research, Department of Economics.
  • Handle: RePEc:new:wpaper:1514
    as

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    File URL: http://www.economicpolicyresearch.org/econ/2015/NSSR_WP_142015.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Cycles; Harrod; Oscillations; Distribution; Minsky;

    JEL classification:

    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
    • E11 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Marxian; Sraffian; Kaleckian
    • 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

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