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From Miracle to Disaster: the Brazilian Economy in the Last 3 Decades

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  • Mirta N. S. Bugarin
  • Roberto Ellery Jr.
  • Victor Gomes
  • Arilton Teixeira

Abstract

In this paper we ask if the Cass-Koopmans model can account for the behavior of the Brazilian economy from 1970 to 1998. We divide this period in two subperiods. In the first one, the 70s, the GNP per working age person grew at 5.05% a year. In contrast with GNP per working age person, Total Factor Productivity (TFP) grows only until 1974, declining in the rest of the decade. After 1974 the growth rate of GNP per Working age person was sustained through an increasing investment share of GNP due to the increment in the public (government plus state owned enterprize) and in the private investment. To increase private investment with a declining TFP, government subsidies to the private sector goes from 1% of GNP to 4% in the second half of the 70s. In the second subperiod, the 80s and 90s, TFP as well as GNP per working age person decrease until 1993, increasing since. Here we also find in the second half of the 80s that investment share is increasing while TFP is decreasing. In this second case it goes up mainly as a result of the increment of price of capital relative to consumption. Once the investment series is adjust for this government behavior as well as the relative price changes, the neoclassical theory is able to fairly describe the investment behavior, hence the dynamics of the Brazilian economy during the period under study.

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Bibliographic Info

Paper provided by DEGIT, Dynamics, Economic Growth, and International Trade in its series DEGIT Conference Papers with number c010_009.

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Length: 25 pages
Date of creation: Jun 2005
Date of revision:
Handle: RePEc:deg:conpap:c010_009

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References

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  1. Mirta N.S. Bugarin & Roberto Ellery Jr & Victor Gomes & Arilton Teixeira, 2002. "The Brazilian Depression in the 1980s and 1990s," Computing in Economics and Finance 2002 338, Society for Computational Economics.
  2. Harold L. Cole & Lee E. Ohanian, 2004. "New Deal Policies and the Persistence of the Great Depression: A General Equilibrium Analysis," Journal of Political Economy, University of Chicago Press, vol. 112(4), pages 779-816, August.
  3. Wacziarg, Romain & Welch, Karen Horn, 2003. "Trade Liberalization and Growth: New Evidence," Research Papers 1826, Stanford University, Graduate School of Business.
  4. Alwyn Young, 2003. "Gold into Base Metals: Productivity Growth in the People's Republic of China during the Reform Period," Journal of Political Economy, University of Chicago Press, vol. 111(6), pages 1220-1261, December.
  5. James A. Schmitz, Jr., 1997. "Government production of investment goods and aggregate labor productivity," Staff Report 240, Federal Reserve Bank of Minneapolis.
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Cited by:
  1. Bridgman, Benjamin & Gomes, Victor & Teixeira, Arilton, 2011. "Threatening to Increase Productivity: Evidence from Brazil's Oil Industry," World Development, Elsevier, vol. 39(8), pages 1372-1385, August.
  2. Arilton Teixeira & Benjamin Bridgman & Victor Gomes, 2009. "Threatening to Increase Productivity," Fucape Working Papers 19, Fucape Business School.
  3. Iza Padilla, MarĂ­a Amaya & Agnani, Betty, 2005. "Growth in an oil abundant economy: The case of Venezuela," DFAEII Working Papers 2005-15, University of the Basque Country - Department of Foundations of Economic Analysis II.

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