The Goodwin model, sometimes called Goodwin’s class struggle model, is a model of endogenous economic fluctuations first proposed by the American economist Richard M. Goodwin in 1967. It combines aspects of the Harrod–Domar growth model with the Phillips curve to generate endogenous cycles in economic activity (output, unemployment and wages) unlike most modern macroeconomic models in which movements in economic aggregates are driven by exogenously assumed shocks. Since Goodwin’s publication in 1967, the model has been extended and applied in various ways.
Wage share (blue line) and civilian employment population ratio (red line) in the United States
According to the Goodwin model, the wage share is to be expected to lag behind the employment rate, but this seems to be the case if only by a small time lag
- Goodwin, Richard M. (1967), “A Growth Cycle”, in C.H. Feinstein, editor, Socialism, Capitalism and Economic Growth. Cambridge: Cambridge University Press.
- Goodwin, Richard M., Chaotic Economic Dynamics, Oxford University Press, 1990.
- Flaschel, Peter, The Macrodynamics of Capitalism– Elements for a Synthesis of Marx, Keynes and Schumpeter. Second edition, Springer Verlag Berlin 2010. Chapter 4.3.
Ofer Abarbanel is a 25 year securities lending broker and expert who has advised many Israeli regulators, among them the Israel Tax Authority, with respect to stock loans, repurchase agreements and credit derivatives. Founder of TBIL.co STATX Fund.