Abstract for: Endogenous Industrial Cycles in a Reshaped “Neoclassical” Model
Two closely related mathematically sophisticated “neoclassical” models of economic growth (first with hidden, second, more general, with intended) economies of scale are considered. The main variables are relative wage and employment ratio, whereas a ratio of investment to profit is constant. The efficiency wage hypothesis supports equations for a growth rate of output per worker. Workers’ competition for jobs is stabilizing and their fight for increased wages is destabilizing as revealed. In each model, a stationary state is locally asymptotically stable in a system of two ODEs. There is no possibility for endogenous industrial cycle. Reality requires negation of this incorrect denial. A third extended model, containing the greed feedback loops, reflects destabilizing cooperation and stabilizing competition of investors. In a system of three ODEs, rate of capital accumulation becomes the new main variable. Its targeted long-term decrease raises profit rate together with reducing relative wage and capital-output ratio. Oscillations imitating industrial cycles are endogenous. Crisis is a manifestation of relative and absolute over-accumulation of capital. Limit cycle with a period of about 6.75 years results from supercritical Andronov – Hopf bifurcation. The reality disagrees with the efficiency wage hypothesis applied in the analyzed models.