Kondratiev Cycle Modelling

Economic activity cycles differ by nature from several rather short 3,7-11, and 25-year cycles arising from the investment process to long cycles of another nature. According to a wide-spread explanation Kondratiev cycles are somehow driven by innovations. We introduce a formal model where at a lower level each moment is observed bi-stable general equilibrium sub-system, potentially having equilibria of zero wages (labor-excessive case) and substantially non-zero wages (labor-deficit case), while at the upper level, we introduce wage-dependent technological progress influencing the labor consumption that leads to periodical disappearing of current stable equilibrium due to competence of neutral and labor-saving technological progress pushing labor productivity up and down in labor-deficit and labor-excessive cases respectively. Due to that, we observe a robust Kondratiev cycle.