The macrodynamics of an endogenous business cycle model of marxist inspiration

Abstract

This study offers a model that formalizes some of Marx's insights about how capital accumulation generates contradictions that may reproduce never-ending cycles of booms and slumps. The model takes the reserve army of labor as a regulator of the distribution of class-power over the business cycle with a two-sided role: influencing labor productivity, directly through the intensity of labor and indirectly through real wages. The model forms a complex dynamical system capable to yield trajectories for the employment rate, the wage share, and the intensity of labor. Goodwin (1967) model may be considered as a particular case of the model. Complex dynamics may also emerge when we remove some key assumptions and explore and simulate 3-D versions of the system. Though close orbits around non-hyperbolic equilibrium points can be obtained, the possibility of unstable dynamics with increasing amplitudes in the trade cycle and a structural crisis cannot be ruled out.