Productive structure and the functional distribution of income: An application of the input-output model

Abstract

The eclac tradition views structural heterogeneity as one of the main causes of Latin America’s unequal income distribution. Accordingly, industrial policy should aim to change the productive structure, while incorporating technical progress and raising productivity levels. Simulations performed using Brazilian input-output tables make it possible to discover and evaluate the effects of changes in the productive structure on the functional distribution of income and employment levels over the most recent business cycle. These simulations are an important tool for formulating industrial policies that simultaneously promote higher growth rates and a reduction in inequalities. The estimations made revealed that increasing the proportion of engineering-intensive sectors could help to improve distributive results, expand the share of wages in output, and create more jobs.