Emergence of chaotic dynamics in the Goodwin model with disequilibrium in the goods market

Abstract

This study investigates the conditions for the emergence of chaotic dynamics in the Goodwin economy studied in Sordi and Vercelli (2014), where the economic fluctuations occur in the presence of a class struggle in the labor force while assuming disequilibrium in the produced goods market. Applying the Shilnikov theorem, we derive a parametric configuration leading to a chaotic region that sets the economy on an undesired indeterminate equilibrium path. We also apply a standard stabilizing algorithm to determine a solution for ending the chaos. Implications of this study are noteworthy, as may produce a more powerful instrument to detect the emergence of unregular (chaotic) cycles and the possible path-dependence of equilibrium trajectories from the initial endowments of an economy, which remain instead hidden when the standard Hopf bifurcation theorem is uniquely applied.