A GOODWINIAN MODEL WITH DIRECT AND ROUNDABOUT RETURNS TO SCALE (AN APPLICATION TO ITALY)

Authors


Alexander V. Ryzhenkov
Institute of Economics and Industrial Engineering
Siberian Branch of Russian Academy of Sciences
17 Academician Lavrentiev avenue
Novosibirsk 630090
Russia
E-mail: ryzhenko@ieie.nsc.ru

ABSTRACT

This paper re-formulates and tests statistically a hypothetical law (HL) of capital accumulation that manifests itself in three scenarios for Italian economy. HL refines Verdoorn law and ‘Ricardian’ relationship between employment and returns; it generalizes neoclassical and Goodwinian models. Big cycles are not sustainable in inertia Scenario I. Lowering direct diseconomy of scale does not alter a non-trivial stationary state in stabilization Scenario II. Weakening an inverse relation between employment ratio and growth rate of capital intensity raises stationary relative labour compensation without deteriorating profitability in stabilization Scenario III. Stationary states with zero relative labour compensation are not economically relevant.

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