Abstract for: Win-lose, Lose-lose and Win-win Stabilization Policies for a Growth Cycle

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 capacity utilization is included. The Phillips-Wolfstetter-Flaschel ‘capricious’ investment function destroys stability of a non-trivial stationary state. Adding ‘neo-classically’ balanced government taxes and expenditures results in attaining stable stationary state again in a three-dimensional model. Yet labour share (even gross) and employment ratio become lower in the long run 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 non-Goodwinian models. Parametric policy optimization supported by Vensim 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.