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The Impact of expenditure on R & D within the Brazilian economy: an approach to Computable General Equilibrium

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  • Gomes, Alexandre
  • Perobelli, Fernando
  • Pio, João

Abstract

The main objective of this paper is to analyze the impacts of capital formation knowledge, acquired through investments in R&D upon the Brazilian production structure and long-term macroeconomic aggregates. Such analysis will be done through the calibration of a computable general equilibrium model (CGE) with detailed specification of R&D and capital knowledge formation. The model follows the ORANIG tradition. We use the System of National Accounts data (SNA) from Brazil for the year 2011 to calibrate the model. The database recognized 91 products and 62 sectors. The structure of the model follows the neoclassical tradition for the behavior of producers, investors and households. Furthermore, there is a nested structure of investment in R&D decision that enables the formation of capital knowledge. On the cost side, on the lower level of the nested structure of production, the compound of primary inputs has been set, with the possibility of substitution among labor, capita, land and capital knowledge. Thus, changes in stock of capital knowledge generate changes in the use of the primary factors, implying a change of productivity. We used the Terleckyj approach strategy to incorporate these new elements in the model structure,. The model's analytical capacity is broad and can be applied to research policies that directly or indirectly affect the realization of R&D. However, in this paper we investigate the effects of changes in stock of capital knowledge in sectors. The shock considers a variation of 1% in the stock of capital knowledge only in sectors that performed R&D in a ratio above 1% of its gross value of production (GVP). The main results indicate positive changes in sectorial productivity, which leads to an increase in the level of competitiveness of sectors of the Brazilian economy. At the aggregate level, there is an increase in export volume, in real household consumption, a positive impact on real GDP and a welfare improvement.

Suggested Citation

  • Gomes, Alexandre & Perobelli, Fernando & Pio, João, 2016. "The Impact of expenditure on R & D within the Brazilian economy: an approach to Computable General Equilibrium," Conference papers 330169, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    • Handle: RePEc:ags:pugtwp:330169
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