Segmented Labor Markets, Distributive Cycles and an Employer of Last Resort
نویسنده
چکیده
The paper builds on the baseline Goodwin (1967) model which describes the reserve army mechanism of capitalist economies. We add to this model segmented labor markets as described in Marx’s Capital, Vol.I. The model exhibits a unique steady state solution which depends on the speeds with which workers are pushed into or out of the labor market segments. We investigate the stability properties of this Goodwin model with segmented labor markets and find that, though there is a stabilizing inflation barrier term in our Phillips curve formulation, interaction with the latent and stagnant portions of the labor market generates potentially destabilizing forces. We then introduce an active labor market policy where government acts as employer-of-last-resort thereby eliminating the stagnant portion of the labor market, whilst erecting a benefit system that sustains the incomes of workers that leave the floating labor market into the latent one. We show that such policies guarantee the macro-stability of the economy’s growth path.
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