GOODWINS GROWTH-CYCLE AND THE EFFICIENCY WAGE HYPOTHESIS

This model examines the robustness of the growth cycle of Goodwin (1967) when the effort level of the workers depends on the level of the real wage, using the Hopf bifurcation theorem. We show that if the effort level decreases as the real wage increase, this model gives rise to a growth cycle, which is locally stable on the side of a unstable stationary equilibrium under a technical condition. We also show that if the effort level depends positively on the real wage, then the stationary equilibrium is stable.