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Longer-run distributive cycles: Wavelet decompositions for the US, 1948–2011
von Arnim, Rudiger
Edward Elgar Publishing
2017
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.
Wage-led and profit-led demand regimes
Endogenous cycles and growth
Short and long Goodwin cycles