Pseudo, or Not? Neo-Goodwinian Growth Cycles With Financial Linkages

Abstract

A profit-led Goodwin mechanism generates the observed counterclockwise activity–labor share cycle. Introducing a financial linkage can reproduce this pattern even when demand is not profit-led. This paper extends neo-Goodwinian theory by incorporating the valuation ratio into a four-dimensional model. We show that the model can generate a limit cycle and that the Goodwin pattern arises in simulations without profit-led demand when financial interactions are present. Redistribution affects cyclical dynamics but has no steady-state growth effects.