Productivity And Growth In The Brazilian Informatics Industry

The informatics industry (ISIC 30 – office, accounting and computing machinery) is one of the fastest growing sectors in manufacturing in the World and in Brazil, and receives special tax breaks in Brazil (the so called “Informatics Law”). We investigate this sector after its liberalization using complementary methods. First, interviews with industry leaders to learn the qualitative aspects of their growth experience. The interviews suggested that firm growth was based either on product differentiation in the business machines subsector (using close software complementarities) or retail chains as distribution channels in computer manufacturing. Access to imported technology is relevant to productivity growth and universities were not an appropriate technology source. Second, we looked at econometric evidence on the role of observable characteristics and, in particular, of the Informatics Law benefits on productivity growth. Our results indicate that firm productivity growth in the sector can be attributed to within firm growth with a positive contribution of market selection, but a negative reallocation effect. The qualitative assessment of the Informatics Law is positive overall for the firms, but its quantitative impact on productivity growth is not significant. On average, less productive firms obtain more Informatics Law benefits, questioning the efficiency of R&D incentives in its current design in Brazil.