DISTRIBUTIVE AND DEMAND CYCLES IN THE US ECONOMY-A STRUCTURALIST GOODWIN MODEL

There are regular counterclockwise cycles involving capacity utilization u (horizontal axis) and the labor share &psgr; (vertical axis) in the US economy since 1929. As in Goodwin's cyclical growth model, &psgr; can be interpreted as a Lotka-Volterra predator variable and u as prey. In a phase diagram, dynamics around the &udot;=0 schedule respond to effective demand that econometric estimation (1948-2002) shows to be profit-led. Distributive dynamics around the <formula format="inline"> <file name="meca_250_mu4a.gif" type="gif" /> </formula>=0 curve demonstrate a long-term profit squeeze. Across cycles, the real wage and labor productivity grow at 0.57 per cent per quarter, holding the labor share broadly stable. Modeling the cycle in the (u, &psgr;) plane provides a parsimonious description of demand and distributive dynamics, consistent with the macroeconomics embedded in the work of Kalecki, Steindl, Goodwin and many subsequent authors. Copyright © 2006 The Authors; Journal compilation © 2006 Blackwell Publishing Ltd.