Advances in Economics and Business Vol. 3(11), pp. 502 - 527
DOI: 10.13189/aeb.2015.031105
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Socially Efficient Stabilization Policies for Growth Cycles


Alexander V. Ryzhenkov 1,2,*
1 Faculty of Economics, Novosibirsk State University, Russia
2 Institute of Economics and Industrial Engineering, Siberian Branch of Russian Academy of Sciences, Russia

ABSTRACT

This paper considers the Fanti and Manfredi Goodwinian two-dimensional model that stabilizes growth cycle by profit-sharing, although a long-term employment rate declines, whereas the stationary relative wage is not affected. For checking robustness of profit-sharing, flexible production capacity utilization is included. The Phillips – Wolfstetter – Flaschel "capricious" investment function destroys stability of a non-trivial stationary state. Adding "neoclassically" balanced government taxes and expenditures results in attaining stable stationary state in a three-dimensional model. Yet stationary labor share and stationary employment ratio becomes lower than in the initial model. This paper revises the preceding equations. The first non-linear three-dimensional model implements proportional and derivative control over growth rate of profit. This rate depends on a gap between the indicated and current employment ratios and on growth rate of this ratio. The second four-dimensional model redefines this combined control applying excess income levy that equals subsidy. The previous models enable extreme condition tests for these Goodwinian and non-Goodwinian models. Parametric policy optimization shortens a transient to a deliberately high target employment ratio without lowering stationary relative wage against the Goodwinian models. The proposed policies enhance stability and efficiency of capital accumulation; they also provide stronger gains for workers' well-being.

KEYWORDS
Capital Accumulation, Class Struggle, Growth Cycle, Profit-sharing, Employment, Government Taxes and Expenditures, Production Capacity, Critique of Neoliberal Economic Policies, Closed-loop Control, Social Efficiency

Cite this paper
Alexander V. Ryzhenkov . "Socially Efficient Stabilization Policies for Growth Cycles." Advances in Economics and Business 3.11 (2015) 502 - 527. doi: 10.13189/aeb.2015.031105.