Abstract
This paper considers the Fanti and Manfredi Goodwinian two-dimensional model that stabilizes growth cycle by profit-sharing, although a long-term employment rate declines, whereas the stationary relative wage is not affected. For checking robustness of profit-sharing, flexible production capacity utilization is included. The Phillips - Wolfstetter - Flaschel capricious investment function destroys stability of a non-trivial stationary state. Adding neoclassically balanced government taxes and expendi- tures results in attaining stable stationary state in a three-dimensional model. Yet stationary labor share and stationary employment ratio becomes lower than in the ini- tial model. This paper revises the preceding equations. The first non-linear three-dimensional model implements pro- portional and derivative control over growth rate of profit. This rate depends on a gap between the indicated and current employment ratios and on growth rate of this ratio. The second four-dimensional model redefines this combined control applying excess income levy that equals subsidy. The previous models enable extreme condition tests for these Goodwinian and non-Goodwinian models. Parametric policy optimiza- tion shortens a transient to a deliberately high target employ- ment ratio without lowering stationary relative wage against the Goodwinian models. The proposed policies enhance stability and efficiency of capital accumulation; they also provide stronger gains for workers' well-being.
Highlights
Introduction onGoodwin’s Model (M-1) and its ExtensionsThe Fanti and Manfredi [1] elaborated the famous Goodwin’s version [2] of the Marxian growth cycle
Fanti and Manfredi [1] extended the simplified Phillips equation by a linear profit-sharing term that reflects the profit rate as a counter-cyclical factor in real wage-change equation. This term implies that ceteris paribus the higher relative profit compels capitalists to promote a growth rate of real wage that is detrimental for profit and profitability
According to the key assumption on the alternative pro-labor stabilization policy, owners of capital, State officials under pressure of workers parties, trade-unions and grass-root organizations set a target growth rate of profit depending on the difference between the indicated X1 and current v employment ratios taking into account the growth rate of production capacity utilization x : M
Summary
I shortly review a simplified model presented in [1] and critically analyzed in [4]. Laborers are advancing capitalists as they receive wage after a particular circuit of capital is finished. Equation (8) links the growth rate of real unit wage w with employment ratio v and profit rate (1 – u)m. The presence of d/m as a lower boundary for rate of accumulation k is a drawback of both M-1 and M-2, since in reality relative wage remains positive even when d/m ≥ k. Models in [6,7] contain endogenous capital-output ratio and endogenous rate of accumulation in the absence of the specified lower bound as a real necessity. The negative feedback loop B2 reflects the positive influence of relative profit (1 – u) on growth rate of profit-sharing wage term that is detrimental for profit rate. The improved profitability promotes increases of employment ratio that facilitate higher bargained wage term to the detriment of profit rate in negative feedback loop B1. M-2 includes two 1st order feedback loops for relative wage u and employment ratio v with alternating polarity
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