The stability properties of goodwin's growth cycle model

Abstract

It is known that Goodwin.s Predator-Prey model suffers from structural instability. In its pure form the model has a neutral equilibrium. Ploeg (1985) showed that if the hypothesis of fixed proportions technology was relaxed then the equilibrium would become stable. We show here that the equilibrium becomes unstable when some sort of endogenous cyclical labour productivity is considered. Then we will study the consequences of considering both effects concluding that the stabilizing effect of considering a flexible technology is much stronger than the destabilizing effect of endogenizing labour productivity.