Disequilibrium Growth Theory

Abstract

This paper is an attempt to extend an analysis of disequilibrium macroeconomics to a problem of capital accumulation. The real wage is assumed to be sluggish so that the labor market may be in disequilibrium. The transaction of labor takes place at the minimum of supply and demand. The interaction between wage adjustment and capital accumulation is studied. If wage adjustment is slow, and if the saving rate from profits is larger than that from wages, then an endogenous force of business cycles switching between unemployment and overemployment regimes can be demonstrated. An appendix to this paper shows a sufficient condition for the stability of differential equation systems in a two-dimensional Euclidean space with switching regimes. This is a mathematical contribution which bears an independent interest.