ENDOGENOUS CHAOTIC DYNAMICS IN TRANSITIONAL ECONOMIES

This paper examines a model of labor market dynamics in an economy und ergoing transition from command socialism to market capitalism. State sector layoffs are modeled as a function of forecasts made by state pl anners of private sector wages where the laidoff workers are to be re- employed. The state switches between using a high information cost per fect forecast and a free naive forecast in a system that resembles a c obweb supply-demand model. Under certain specifications and parameter values chaotic dynamics are shown to endogenously emerge along with se veral other varieties of complex dynamics including strange attractors , coexistence of infinitely many stable cycles, cascades of infinitely many period doubling bifurcations and fractal basin boundaries betwee n coexisting non-chaotic attractors. Copyright (C) 1996 Elsevier Scien ce Ltd.