An Extended Goodwin Model with International Trade

Chaos is one of the most interesting topics in resent economic dynamics. Pohjola(1981) cnstructed a simple discrete-time model htat is capable of generating chaotic growth paths by modifying Goodwin's(1967) growth cycle model. His modification is the introduction of a bargaining uquation. Takamasu(1997) indicated by computer simulations that chaotic movements are observed if Skott's output expansion function(See Skott(1989)) replaced the assumtion of fixed capital-output raio. In this paper we demonstrate the emerence of chaos by allowing for international trade to the Goodwin model. Although it involves some 'bold' assumptions, it is meaningful to construct a framwork of Goodwin model with international trade, because it seemed no work has discussed this problem. The plan of this paper is as follows. We set up our model in section 2, then long-run equilibria of the model are considered in section 3. Dynamic properties of the model are analyzed in sections 4 and 5. The final section summarizes the results of the extension.