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Pseudo-Goodwin cycles in a Minsky model

Stockhammer, Engelbert; Michell, Jo

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Engelbert Stockhammer

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Jo Michell
Professor of Economics


Goodwin cycles result from the dynamic interaction between a profit-led demand regime and a reserve army effect in income distribution. The paper proposes the concept of a pseudo-Goodwin cycle. We define this as a counter-clockwise movement in output and wage share space which is not generated by the usual Goodwin mechanism. In particular, it does not depend on a profit-led demand regime. To illustrate this, a simple Minsky-type model is extended by a reserve army distribution adjustment. In this model the cycle is generated by the interaction of financial fragility and demand. The wage share rises at higher levels of output but this generates no feedback so that, by design, demand does not react to changes in income distribution. But the model does exhibit a pseudo-Goodwin cycle in the output-wage share space. This holds true even if we introduce a wage-led demand regime. This demonstrates that the existence of a counter-clockwise movement of output and the wage share cannot be regarded as proof of the existence of a Goodwin cycle and a profit-led demand regime.


Stockhammer, E., & Michell, J. (2014). Pseudo-Goodwin cycles in a Minsky model

Publication Date May 1, 2014
Publicly Available Date Jun 6, 2019
Peer Reviewed Peer Reviewed
Keywords business cycles, Goodwin cycle, Minsky cycle, financial fragility, distribution cycles, Post Keynesian economics
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