Ph.D. Barrales-Ruiz, Jose

This paper surveys current debates on the distributive cycle. The literature builds on Goodwin's seminal 1967 chapter titled “A growth cycle.” We review theoretical motivations for the distributive cycle, which, despite significant differences, all imply that macroeconomic activity leads the labor share in a counterclockwise cycle in the activity‐labor share plane. Subsequently, we summarize and update evidence on the existence of a distributive cycle, with a focus on the post‐war U.S. macroeconomy. We analyze activity and labor share series and their interaction in the frequency domain, and also employ standard vector autoregressions. Results confirm the distributive cycle for the U.S. post‐war period. We contextualize results vis‐à‐vis current debates: (1) we consider a financial cycle, to rebut the theoretical possibility of “pseudo‐Goodwin” cycles, (2) demonstrate that a suppressed labor share and stagnation are compatible with short‐run Goodwin cycles, and argue that this link presents the way forward for research on secular stagnation.

This paper empirically investigates the possibility of self-sustained oscillations at business cycle frequency. The theoretical model considers aggregate economic activity and the functional income distribution in the spirit of Goodwin (1967). In the empirical investigation, we utilize four measures each of economic activity and the labor share for the US post-war macroeconomy. Using Schuster’s periodogram, we first show that these time series have an important frequency peak at about forty quarters. We therefore detrend them with wavelet methods. To allow for nonlinear dynamic interaction, we introduce a feedforward neural network (FNN). This method is first shown to correctly identify stability or a limit cycle in simulations of the theoretical model with reasonable noise and sample size. Estimation results provide some support for a limit cycle in the post-war US, but this evidence is not independent of detrending methods used.

Goodwin's original endogenous growth cycle describes a supply-driven counter-clockwise movement in employment rate and labor share (Goodwin 1967). Such cycles are observed in (US) data. Similarly, counter-clockwise cycles exist between utilization rate and labor share, and utilization rate and employment rate. This paper presents a critical discussion of two demand-driven frameworks to explain these cycles, namely a Goodwin–Kaldor model and a Goodwin–Kalecki model. The two models share important features. The main difference lies in the approach to the determination of the distribution of income. We argue that the Goodwin–Kalecki model's ‘profit squeeze’ is the preferable approach.

This paper presents an analysis of the comovement of the income–capital ratio, output gap, and employment rate vis-à-vis the functional distribution of income. We decompose time series into wavelets of varying periodicity. Cycles at all periodicities in all three variables vis-à-vis wage share show a counter-clockwise (‘Goodwin’) pattern. The well-known regular cycles appear at business cycle frequency. Furthermore, a roughly 30-year cycle exists before 1980. Post-1980, no clear medium-run cyclical picture emerges. This finding is complemented by wavelet covariance analysis, which suggests that covariance of longer period cycles is negative before 1980, but positive thereafter. Crucially, trajectories of trends across the entire postwar period raise the possibility of one ‘long’ 60-year Goodwin cycle in all three variables vis-à-vis the wage share, which would suggest that sustained growth after c.2000 required much broader real wage increases relative to labor productivity. We conduct non-parametric Granger tests, which indicate that systematic interaction at all periodicities exist. We discuss our findings in relation to the debate on wage-led and profit-led demand regimes.