Abstract
ABSTRACT The aim of this paper is to discuss the evolution of the Brazilian labour productivity in the 1990s and 2000s to shed some light on the resilience of the Brazilian economy to recover growth. Labor productivity growth in Brazil, after showing positive annual rates between 1950 and 1979, became stagnant after 1980. Following McMillan and Rodrik’s (2011) methodology, this paper at first decompose labor productivity growth in the period 1950-2011, according to “structural change” (which is considered growth-enhancing) and “within effect” (which is growth-reducing, if not accompanied by significant structural change while the country is still pursuing its catching-up process). Next, an econometric exercised is presented to explain the determinants of the structural change component of the labour productivity since economic opening in the 1990s. The results show that the stagnation of the Brazilian productivity is explained by the overvaluation trend of the Brazilian currency, the reprimarization of the export basket, the low degree of Brazil’s trade openness and the high real interest rates prevailing in the period.
Highlights
The Brazilian economy has shown low resilience to grow since the 2015-2016 recession
Economic stagnation started way before the country ever reached a high per capita income level. This suggests that the long-term stagnation of the Brazilian economy is related to premature deindustrialization, a process through which the relative loss of importance of the manufacturing sector is followed by a sharp reallocation of labor from both the primary (the traditionally low Brazilian Journal of Political Economy 40 (2), 2020
Firpo and Pieri (2016: 269), replicating the same McMillan and Rodrik’s (2011) methodology of decomposition of labor productivity in Brazil concluded that “structural changes have become less important to explaining productivity growth in the Brazilian economy than in the past, mainly because Brazil is an emerging economy, with a relatively diversified industrial sector, but with a relatively low level of labor productivity”
Summary
The Brazilian economy has shown low resilience to grow since the 2015-2016 recession. Economic stagnation started way before the country ever reached a high per capita income level This suggests that the long-term stagnation of the Brazilian economy is related to premature deindustrialization, a process through which the relative loss of importance of the manufacturing sector is followed by a sharp reallocation of labor from both the primary (the traditionally low Brazilian Journal of Political Economy 40 (2), 2020 pp. Notwithstanding the importance of the coordination of the economic policies to explaining long-term growth, the new-developmentalist literature points out that the productive structure matters. Fourth section presents statistical evidence on the Brazilian labor productivity growth in the period 1950-2011,1 1950-1979 (the growth period) and 1980-2011 (the stagnant period) according to structural change (growth-enhancing) and within (growth-reducing) components as proposed by McMillan and Rodrik’s (2011) methodology.
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