Testing Goodwin: growth cycles in ten OECD countries

Following Desai (Desai, M. 1984. An econometric model of the share of wages in national income: UK 1855-1965, pp. 253-77 in Goodwin, R. M. et al. (eds ), Nonlinear Models of Fluctuating Growth, Berlin, Springer), Goodwin's sim ple 'predator-prey', growth cycle model of the economy (Goodwin, R. M. 1967 . A growth cycle, pp. 54-8 in Feinstein, C. H. (ed.), Socialism, Capitalism and Economic Growth, Cambridge, Cambridge University Press; reprinted in G oodwin, R. M. 1982. Essays in Economic Dynamics, Basingstoke, Macmillan, pp . 165-70) is tested, using postwar data for ten OECD countries-Australia, C anada, Finland, France, Germany, Greece, Italy, Norway, the UK and the US. At a quantitative level, Goodwin's model is found not to be adequate: (i) e stimated parameter values poorly predict the cycles' centres; and (ii) Good win's restrictive assumptions are not justified. However, at a qualitative level, the evidence presented here for the existence of Goodwin-type cycles is extremely encouraging, justifying both existing theoretical extensions of Goodwin's model and further empirical work in this area.