Prosperity and Stagnation in Capitalist Economies
The KMG growth dynamics in Chiarella and Flaschel (2000) assume that wages, prices and quantities adjust sluggishly to disequilibria in labor and goods markets. This paper modifies the KMG model by introducing Steindlian features of capital accumulation and income distribution. The resulting KMGS(teindl) model replaces the neoclassical medium- and long-run features of the originalKMG model by a Steindlian approach to capital accumulation, as developed in a paper by Flaschel and Skott (2005). The model is of dimension 4 or 5, depending on the specification of the labor supply. We prove stability assertions and show that loss of stability always occurs by way of Hopf-bifurcations. When global stability gets lost, a nonlinear form of the Steindlian reserve army mechanism can ensure bounded dynamics. These dynamics are studied numerically and shown to exhibit long phases of prosperity, but also long phases of stagnant growth. JEL Categories: E24, E31, E32.
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- Peter Skott & Peter Flaschel, 2004.
"Steindlian Models of Growth and Stagnation,"
UMASS Amherst Economics Working Papers
2004-11, University of Massachusetts Amherst, Department of Economics.
- repec:cup:cbooks:9780521643511 is not listed on IDEAS
- Steindl, Josef, 1979. "Stagnation Theory and Stagnation Policy," Cambridge Journal of Economics, Oxford University Press, vol. 3(1), pages 1-14, March.
- Olivier Jean Blanchard & Lawrence Katz, 1999.
"Wage Dynamics: Reconciling Theory and Evidence,"
NBER Working Papers
6924, National Bureau of Economic Research, Inc.
- Hans-Martin Krolzig & Peter Flaschel, 2003.
"Wage and Price Phillips Curves An empirical analysis of destabilizing wage-price spirals,"
Economics Series Working Papers
2003-W16, University of Oxford, Department of Economics.
- Peter Flaschel & Hans-Martin Krolzig, 2003. "Wage and Price Phillips Curves An empirical analysis of destabilizing wage-price spirals," Economics Papers 2003-W16, Economics Group, Nuffield College, University of Oxford.
- Skott, Peter, 1989. "Effective Demand, Class Struggle and Cyclical Growth," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 30(1), pages 231-47, February.
- repec:cup:cbooks:9780521850254 is not listed on IDEAS
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