Abstract for: Insights into Income Policy for Enhancing Employment and Stability of Capital Accumulation

This paper reveals how the deterministic non-linear Lordon – Goodwin model (LGM- I) endogenously generates cycles of absolute and relative over-accumulation of capital similar in important aspects to the Marx industrial cycle. This model hyperbolizes acuteness of accumulation crises. By correcting functional relations for implicit rate of capital accumulation, the present paper transforms LGM-I into LGM-II. Scenario I of sluggish stabilization at a low level of employment is based on a refined model LGM-II. Scenario II is a futile attempt to achieve hastily a substantially higher level of employment than in scenario I by policy optimization within the same improper social structure of accumulation. This paper revises original equations for profit sharing and bargaining wage terms and offers an upgraded model of capital accumulation LGM- III where a growth rate of total profit depends positively on a gap between the target and current employment ratios. The latter policy rule does not cause over-shooting of profit and under-shooting of wage in satisfying scenario III unlike ill-defined policy rule in scenario II rooted in LGM-I and LGM-II. The Structural Control Theory has helped in the policy design phase. A qualitative analysis of local stability for non-linear models is extended by exposing transients to distant attractors.