Economic models and the relevance of ‘chaotic regions’: An application to Goodwin's growth cycle model

In this paper, we argue that Pohjola's one-dimensional, discrete-time version of Goodwin's growth cycle model is based on assumptions that conflict with the ‘symbiotic-conflictual’ spirit of the model. It is shown that when the assumption about the dynamical real wage is modified, in contrast with Pohjola's opinion, the likelihood of chaotic solutions does not increase. In particular, when a discrete-time Phillips curve is considered, the model becomes two-dimensional, but admits chaotic solutions only for parameter values which are not within economically reasonable values.