Testing a Goodwin model with general capital accumulation rate

We perform econometric tests on a modified Goodwin model where the capital accumulation rate is constant but not necessarily equal to one as in the original model (Goodwin, ). In addition to this modification, we find that addressing the methodological and reporting issues in Harvie () leads to rema...

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Bibliographic Details
Published in:Metroeconomica 2018-07, Vol.69 (3), p.619-643
Main Authors: Grasselli, Matheus R., Maheshwari, Aditya
Format: Article
Language:English
Subjects:
Accumulation
Averages
Capital formation
Economic analysis
Economic models
Employment
Endogenous
Equilibrium
Simplicity
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Summary:We perform econometric tests on a modified Goodwin model where the capital accumulation rate is constant but not necessarily equal to one as in the original model (Goodwin, ). In addition to this modification, we find that addressing the methodological and reporting issues in Harvie () leads to remarkably better results, with near perfect agreement between the estimates of equilibrium employment rates and the corresponding empirical averages, as well as significantly improved estimates of equilibrium wage shares. Despite its simplicity and obvious limitations, the performance of the modified Goodwin model implied by our results show that it can be used as a starting point for more sophisticated models for endogenous growth cycles.
ISSN:0026-1386
1467-999X
DOI:10.1111/meca.12204