| Abstract: | This study builds a dynamic balance‐of‐payments‐constrained model that incorporates the endogenous determination of the economic growth rate, conflictive wage/price distribution and employment rate. The wages, commodity prices and employment rate are determined by the profit squeeze effect and labour‐saving technical change. The relative strength of these two effects generates different outcomes for the transitional dynamics and comparative statics analysis. Particularly, the model shows stability, instability and cyclical nature, the latter of which concurs with the evidence reported by previous empirical studies. |
