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Pseudo, or not? Neo-Goodwinian growth cycles with financial linkages

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  • Rudiger von Arnim
  • Luis Felipe Eick

Abstract

Barbosa-Filho and Taylor (2006) propose a theoretical model with the Goodwin mechanism (profit-led economic activity and profit-squeeze distribution of income) that generates the Goodwin pattern (a counter-clockwise cycle in activity-labor share space), which fits data well. Stockhammer and Michell (2017) investigate a three-dimensional model in output, labor share and firms' debt, and demonstrate that the inclusion of the financial linkage produces the Goodwin pattern in simulations even if demand is not profit-led (or weakly wage-led). This paper extends neo-Goodwinian theory to include the valuation ratio q. In two different models, we corroborate that the Goodwin pattern can indeed arise in simulations without profit-led demand when a financial linkage is present. Further, the Keynesian distributive cycle theory we build on clearly distinguishes between short run (usually profit-led) cycles, and a long run (potentially wage-led) steady state. In the two models discussed here, redistribution has no steady state effects.

Suggested Citation

  • Rudiger von Arnim & Luis Felipe Eick, 2025. "Pseudo, or not? Neo-Goodwinian growth cycles with financial linkages," Working Paper Series, Department of Economics, University of Utah 2025-02, University of Utah, Department of Economics.
    • Handle: RePEc:uta:papers:2025-02
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    Keywords

    Goodwinian theory; cyclical growth; growth and distribution. JEL Classification: E12; E25; E32; J50.;
    All these keywords.

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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