Increasing returns and labor markets in a predator–prey model

Abstract The purpose of this work is to study the joint interaction of three founding elements of modern capitalism, namely endogenous technical change, income distribution, and labor markets, within a low-dimensional nonlinear dynamic setup extending the Goodwin model. Going beyond the conservative structure typical of the predator–prey model, we insert an endogenous source of energy , namely a Kaldor–Verdoorn (KV) increasing returns specification, that feeds the dynamics of the system over the long run and in that incorporates a transition to an (anti)-dissipative framework. The qualitatively dynamics and ample array of topological structures reflect a wide range of Kaldorian stylized facts, as steady productivity growth and constant shares of income distribution. The intensity of learning regimes and wage sensitivity to unemployment allow to mimic some typical traits of both Competitive and Fordist regimes of accumulation, showing the relevance of the demand-side engine, represented by the KV law, within an overall supply-side framework. High degrees of learning regimes stabilize the system and bring it out of an oscillatory trap. Even under regimes characterized by low degrees of learning, wage rigidity is able to stabilize the business cycle fluctuations and exert a positive effect on productivity growth.