The distributive cycle: Evidence and current debates

Abstract

This paper surveys current debates on the distributive cycle. The literature builds on R.M. Goodwin' s seminal 1967 chapter titled " A growth cycle." We review theoretical motivations for the distributive cycle, which, despite signif-icant differences, all imply that macroeconomic activity leads the labor share in a counter-clockwise cycle in the activity-labor share plane. Subsequently, we summarize and update evidence on the existence of a distributive cycle, with a focus on the post-war US macroeconomy. We analyze activity and labor share series and their interaction in the frequency domain, and also employ stan-dard vector autoregressions. Results confirm the distributive cycle for the US post-war period. We contextualize results vis-à-vis current debates: (1) we consider a financial cycle, to rebut the theoretical possibility of " pseudo-Goodwin" cycles, (2) demonstrate that a suppressed labor share and stagnation are com-patible with short run Goodwin cycles, and argue that this link presents the way forward for research on secular stagnation.

Testing the Goodwin Growth Cycles with Econophysics Approach in 2002-2019 Period in Turkey

“…As the decline in wages causes increase in profit opportunities and create new investment opportunities, it will initiate a new expansion phase. Thus, the cyclical structure of accumulation will emerge [26,47,48]. In this context, the main difference of the form of capital accumulation process propounded by Marx is that investments, unemployment and technological change are internalized into the growth process as economic factors that both affect and are affected by capital accumulation.…”

“…The contradiction between wages and profits is explained by nonlinear differential equations, with a dynamic accumulation model in the space of wage share-employment rate. The essential dynamics of capitalist society have been established with the adaptation of the classic Lotka-Volterra prey-predator model to economic relations in which capital and labor are conflicted but symbiotic, as a singlesector and two-class model of share struggle in national income [48,50,51,52].…”

“…The model reveals the relationships between economic variables as a closed trajectory in the u−v phase space [26]. After Goodwin [28] published his basic model, many studies have been carried out that test the validity of the model [27], trying to develop the model by extending its basic assumptions or adding theoretical contributions [28,29,30,31,32,33,34,35,48,50], and examining the empirical results of the model [26,36,37,38,39,40,51,57,58].…”

Analytical political economy: Complexity, growth, international trade

“…Barrales‐Ruiz et al. (2022) discuss recent debates on the distributive cycle, which captures the interaction between functional income distribution and the level of economic activity. Originated by Goodwin's (1967) seminal paper on the “growth cycle,” the theory of the distributive cycle looks at economic growth as the result of the conflictual interaction between profit‐seeking capital and the workers it employs.…”

Business cycles, financial conditions, and nonlinearities

“…The CPS mechanism has also received numerous criticisms, such as Sherman (1972Sherman ( , 1997-who highlighted the importance of demand side factors to complement the reliance on supply side factors, cyclical under-consumption and induced squeeze of profits associated with non-labor costs; and Michl (1988a), Epstein (1991), and Weisskopf (1992)-who were skeptical about the efficacy of the CPS in explaining business cycles under neoliberal capitalism because the latter has reduced the relative bargaining power of labor, making profit squeeze of economic fluctuations less plausible during recent decades. Basu et al (2013) offer a comprehensive discussion of this literature; while broader discussions about the recent literature on the interactions between income distribution and economic activity can be found in Kiefer and Rada (2015), Von Arnim and Barrales (2015), Rada and Kiefer (2016), Barrales and von Arnim (2017), and Barrales et al (2021).…”