Exports of manufactured goods and structural change: Brazil in the face of Chinese competition

Abstract

This paper analyses the relationship between Brazil´s regressive specialisation and China´s increased international competitiveness. The Brazilian economy's lack of dynamism and competitiveness in global markets, particularly when it comes to the production and exportation of manufactured goods, has coincided with China's rise as a global powerhouse. This is why we have considered whether an increase in China´s market share in a third country's market is associated with an increase or decrease in Brazil´s market share. To test this relationship, we applied a generalised method of moments (IV-GMM) in a panel data framework. Our main results suggests that: (i) China´s market share increases were associated with decreases in Brazil´s share; and (ii) the effect of Chinas´ market share can change according to the size of the partner's economy. Finally, we have explored the implications of our findings considering Keynesian and structuralist theories, which highlight the importance of the manufacturing sector.