Ph.D. Barrales-Ruiz, Jose

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.