The Development And Application Of Goodwin Model And Its Chinese Test

Inspired by Marx's long-standing conflict of labor and capital,Goodwin uses the Lotka-Volterra model in biology to describe the interdependence between wage and employment rates in the capitalist economy.This model and its various forms of expansion are also widely used to describe economic relations such as labor relations,income distribution and employment volatility.With the gradual deepening of the market-oriented reform and progress,China's wage ratio and employment rate changes in different periods and regions whether there also exist Goodwin cycle? What about performance? This paper based on the Goodwin model,revealing the relationship between China's wage share and the change of employment rate,and indirectly observe the process of China's marketization.In this paper,the basis,origin and development of the Goodwin model are first reviewed.Goodwin model studies the cyclical fluctuation between the wage share and the employment rate.Under the high employment rate,the bargaining power of the workers increases,while the decrease in corporate profits will lead to negative feedback regulation of the employment rate.As the employment rate declines,the bargaining power of the workers will be weakened and the wages of the workers will be reduced,so that the profits will increase.After that,more workers will be hired and employed at high profit level,then the employment rate will increase,so the cycle is emerged.Its theoretical inspiration comes from Marx: the contradiction between labor and capital through income distribution,and its mathematical construction is based on the Lotka-Volterra predator-prey model in biology.Goodwin model is endogenous,closed,procyclical,unstable and so on.As the real economic problems become more and more complex,the Goodwin model also implements the "modified" and "advanced" extensions in the application process:(1)Real life is not like the biological system,there are not the situation of no predator and prey show an exponential growth,so the Malthusian growth is considered in Goodwin model;(2)In view of the existence of price stickiness in the economy,the feedback regulation of employment and wages will not be as direct as that of biological systems,and there is a certain time lag,so the weight function is used to adjust Goodwin model(3)Considering the instability of the model and structure,we introduce the weight function to adjust the stability of the model again.After a series of improvements and extensions,the Goodwin model has been able to accurately predict changes in wages and real employment,as well as to estimate the operating cycle and some short-term unemployment cycle.Brody(1987)and Farkas(1990)estimated the Goodwin cycle in the Hungarian economy using Hungarian data,based on the original Goodwin model and the modified Goodwin model(considered the distribution delay),respectively.Goodwin model with time delay can further be used to estimate the actual economic cycle.Mohun(2006)used the Goodwin model to study the long-term trend of the US firm's economy from 1948 to 2004,and found that the Goodwin cycle in the US firm's economy existed for a short time and did not exist for a long time.However,whether it is compared with the United States or Hungary,China has a considerable degree of particularity.With the increasing marketization of China,capital employ labor is more general and systematic,so the Goodwin cycle,specifically,the relationship between employment rate and wage ratio accounting is more obvious.In this paper,we choose China's macro economy,China's urban economy(excluding employment and wages from rural and urban self-employment),some representative cities and regions as the mainstay,using the time series data of 1978-2014 of wage share and employment rate,to study Goodwin cycle.The results show that the Goodwin cycle exists in the Chinese economy in a short run,and the Goodwin cycle in China is ten years(fits two five-year plan).Although the Goodwin model is instability,Goodwin cycle is different in time,amplitude,position.In addition,the long-term trend of wage shares and employment rates in 1978-2014 indicates that the Goodwin cycle is present in the Chinese economy for a long run.At the same time,after the layers of streamlined data empirical test,we found that the Goodwin phenomenon(the relationship between wage ratio and employment rate changes)is existed in China,but this kind of interdependence and shift-up relationship will be more obvious in cities and regions which have a higher degree of marketization.