Effects of Economic Policies on the Brazilian Industrial Sector: Lessons from Austrian School of Economics

Abstract

This paper examines how Brazil’s government interventions, via economic policy affects the total factor productivity (TFP) and the industrial production growth rate in the period of 1998:4 to 2012:1. The study uses nine indicators of economic policy and the empirical results show that high values of tax burden, the real interest rate, the real minimum wage, the electricity tariffs and the proportion of interest burden of public debt/GDP reduce the TFP and the growth of industry and in contrast, high proportions of primary spending/GDP and BNDES credit/GDP positively affect these indicators of industry. The net effect of these interventions shows a negative impact on the TFP and the growth rate of industrial production as well. In this context, the discussion raised by Mises is still update and important due to the fact that the same notions of state interventionism still lingers.