accounting for coincident growth collapses: brazil and mexico since the early 1980s edmar bacha and...
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ACCOUNTING FOR COINCIDENT GROWTH COLLAPSES:
BRAZIL AND MEXICO SINCE THE EARLY 1980s
Edmar Bacha and Regis Bonelli
Conference in Honor of Albert Fishlow
Casa das Garças, Rio de Janeiro
07/03/2014
SUMMARY
• Growth collapses: a periodization• Capital accumulation and the growth collapses• Decomposing labor productivity growth• Brazil’s TFP’ and the terms of trade• Productivity growth and structural heterogeneity (by region, tradability, firm size, and formality)
GDP per capita relative to the US: Convergence to 1980-81, divergence afterward
(2014 US$, PPPs)
19
50
19
52
19
54
19
56
19
58
19
60
19
62
19
64
19
66
19
68
19
70
19
72
19
74
19
76
19
78
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
20
08
20
10
20
12
20
14
0.20
0.25
0.30
0.35
0.40
0.45
0.50
BRA / US MEX / US
Mexico and Brazil — 10-year moving averages of GDP growth rates, 1950-2014 (% a.a.)
19
50
19
52
19
54
19
56
19
58
19
60
19
62
19
64
19
66
19
68
19
70
19
72
19
74
19
76
19
78
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
20
08
20
10
20
12
20
14
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
MEXICO BRAZIL
Growth periodization, 1950-2014 (% a.a.)
Periods Brazil Mexico
Brazil's average GDP
growth
Mexico's average GDP
growth
Post WW-II Golden Age1950-1980
1950-1981 7.4% 6.8%
Post-1980 Near Stagnation
1981-2014
1982-2014 2.6% 2.2%
Lost Decade1981-1992
1982-1993 1.4% 1.6%
Reforms with Subpar Growth
1993-2003
1994-2001 2.8% 3.0%
China Syndrome2004-2010
2002-2010 4.5% 1.9%
Day after the Great Recession
2011-2014
2011-2014 2.1% 2.9%
Brazil — Capital stock and GDP growth rates, 1950-2014 (%)
19
50
19
52
19
54
19
56
19
58
19
60
19
62
19
64
19
66
19
68
19
70
19
72
19
74
19
76
19
78
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
20
08
20
10
20
12
20
14
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
14%
K' Y'
Mexico — Capital stock and GDP growth rates, 1950-2014 (%)
19
50
19
52
19
54
19
56
19
58
19
60
19
62
19
64
19
66
19
68
19
70
19
72
19
74
19
76
19
78
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
20
08
20
10
20
12
20
14
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
K' Y'
Decomposition of the capital stock growth rate • Start from:
Pi I = S,
• Where: Pi is the implicit price deflator of gross capital formation, I is gross real investment, and S is total savings (domestic+foreign) in current prices. Inventory changes are assumed equal to zero.
• Divide both sides by PiK (where K is the capital stock):
I/K = S/PiK
• Divide and multiply the right-hand side by PyY (where Py is the implicit price deflator of GDP and Y is real GDP):
I/K = (S/PyY)(Py/Pi)(Y/K)• Subtract the capital stock depreciation rate (δ) from both sides, and rearrange to
obtain:
K' = s(1/p)v – δ• Where: K’ = I/K – δ, s = S/PyY, and p = Pi/Py
Brazil: Decomposition of K’, 1950-2014
BRAZILYears K' s v p δ*
Post WW-II Golden Age1950-1980
8.8% 19.4% 0.506 0.784 3.6%
Lost Decade1981-1992
3.3% 20.9% 0.357 1.009 4.1%
Reforms with Subpar Growth
1993-2003
2.1% 18.3% 0.352 1.013 4.2%
China Syndrome2004-2010
2.8% 18.5% 0.382 1.024 4.1%
Day after the Great Recession
2011-2014
4.0% 20.3% 0.383 0.973 4.0%
Post-1980 Near Stagnation
1981-2014
2.9% 19.5% 0.364 1.009 4.1%
Mexico: Decomposition of K’, 1950-2014
MEXICO Years K' s v p* δ **
Post WW-II Golden Age1950-1981 8.0% 16.4% 0.656 0.795 5.6%
Lost Decade 1982-1993 3.3% 17.3% 0.470 0.915 5.6%
Reforms with Subpar Growth
1994-2001 3.7% 17.5% 0.443 0.842 5.5%
China Syndrome2002-2010 3.5% 22.2% 0.410 0.967 6.0%
Day after the Great Recession
2011-2014 2.8% 21.5% 0.391 0.919 6.3%
Post-1980 Near Stagnation
1982-2014 3.4% 18.5% 0.438 0.887 5.8%
Brazil: Decomposition of output growth per worker
y' = αk' + TFP’
Decomposition Brazil y' L'
alfa*k' TFP'
1951-80 4.2% 3.1% 2.5% 1.7%1981-92 -0.8% 2.2% 0.7% -1.4%1993-03 0.3% 2.5% -0.2% 0.4%2004-10 2.2% 0.5% 0.2% 2.0%2011-14 1.1% 1.0% 1.3% -0.2%1981-14 0.4% 2.2% 0.4% 0.0%
Mexico: Decomposition of output growth per worker
y' = αk' + TFP’
Decomposition Mexico
y' L'alfa*k
'TFP'
1951-1981 3.4% 3.2% 2.1% 1.3%
1982-1993 -1.7% 3.4% 0.1% -1.8%
1994-2001 0.7% 2.3% 0.6% 0.1%
2002-2010 0.3% 1.6% 0.9% -0.5%
2011-2014 1.0% 1.9% 0.4% 0.6%
1982-2014 -0.2% 2.5% 0.5% -0.7%
Brazil — TFP’ and terms of trade (ToT)
rate of change, 1981-20141
98
1
19
82
19
83
19
84
19
85
19
86
19
87
19
88
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
-10%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
30%TFP per cent changeToT rate of change (right hand side axis)
Brazil’s TFP’, terms of trade, and business cycles[IV* regression, 1981-2014]
Dep. variable: TFP' 34 obs. (1981-2014)
Adjusted R-squared = 0.426
CoefficientsSt.
Error Stat t P-value
Intercept 2.85 0.92 3.10 0.004Relative change ToT 0.18 0.07 2.81 0.008Capacity use gap (%)* -0.42 0.15 -2.72 0.011
Regional dispersion of per capita incomes, Brazil and Mexico, 1989(90)-2011(13)
(sigma=s.d. States’ per capita incomes/unweighted mean income)
Labor productivity ratios: Traded/non-traded relationship
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
090.7
0.80.91.01.11.21.31.41.51.61.71.8
Bra trade /nontrad Mex trade /nontrad
Productivity growth by firm size (manufacturing, commerce and services) - Mexico, 1998-2008
Firm sizeMexico: Productivity growth 1998-2008 (% a.a.)
0 - 10 -6.5%
11 -30 -2.2%
30 - 100 0.2%
101 - 250 2.9%
251 - 500 2.4%
501 + 5.9%
Total 2.0%
Productivity growth by firm size (manufacturing) - Brazil, 1996-2007 [incomplete]
Firm sizeProductivit
y 2007Productivi
ty 1996
Productivty1996 (2007
prices)
Brazil: Productivity
growth 1996-2007
0 - 10 3.153 1182.6 2967 0.6%
10 - 29 168 33.9 85 6.4%
30 - 99 92 36.5 92 0.0%
100 - 249 156 55.6 139 1.0%
250 - 499 219 67.6 170 2.3%
500 + 325 100.4 252 2.3%
Total 242 76.6 192 2.1%
Informality rates per State. Mexico, 2012
Oxa
ca
Gue
rrer
o
Chia
pas
Hid
algo
Tlax
cala
Pueb
la
Mic
hoac
án d
e O
cam
po
Vera
cruz
de
Igna
cio
de la
Lla
ve
Nay
arit
Zaca
teca
s
Mor
elos
Yuca
tán
Gua
naju
ato
Taba
sco
Cam
pech
e
Nac
iona
l
San
Luis
Pot
osí
Méx
ico
Dur
ango
Jalis
co
Colim
a
Sina
loa
Qui
ntan
a Ro
o
Tam
aulip
as
Agu
asca
lient
es
Que
réta
ro
Dis
trit
o Fe
dera
l
Sono
ra
Baja
Cal
iforn
ia
Coah
uila
de
Zara
goza
Chih
uahu
a
Nue
vo L
eón
Baja
Cal
iforn
ia S
ur
0102030405060708090
80.0
59.6
42.0
Taxa de emprego informal nas unidades federativas, 2012 - México.
Informality rates per State. Brazil, 2012
Mara
nh
ão
Pia
uí
Pará
Ceará
Para
íba
Bah
ia
Acre
Am
azo
nas
To
can
tin
s
Serg
ipe
Ala
go
as
Rio
Gra
nd
e d
o N
ort
e
Ro
raim
a
Pern
am
bu
co
Ro
nd
ôn
ia
Am
ap
á
Nacio
nal
Go
iás
Esp
írit
o S
an
to
Mato
Gro
sso
Min
as G
era
is
Rio
Gra
nd
e d
o S
ul
Mato
Gro
sso
do S
ul
Para
ná
Rio
de J
an
eir
o
San
ta C
ata
rin
a
São
Pau
lo
Dis
trit
o F
ed
era
l0102030405060708090
76.5
47.6
30.0
Taxa de emprego informal por estado, 2012 - Brasil.
Regression for States’ informality rates,
Brazil and Mexico (2012)Dep. Var.: Informality Rate (%)
R-square adjusted 0.730
Standard error 6.208
Observations 59 27 BRA, 32 MEX
Coefficient
sStandard
Error Stat t P-value
Intercept 266.8 17.8 15.0 0.00%
log (GDP pc PPP) -22.8 1.9 -12.0 0.00%
Dummy MEX 10.5 1.7 6.3 0.00%
Dummy Campeche 50.0 7.4 6.7 0.00%
Labor informality rates, Brazil and Mexico, Selected years (%)
Summary (macro)
• Close association between GDP and K-growth collapses since the 1980s• K-growth collapses not due to savings: culprits were
lower output-capital ratios and higher relative prices of investment• Near-secular stagnation of labor productivity is
explained more or less equally by less capital deepening and TFP • Terms of trade and business cycle são important
determinants of Brazil’s measured TFP
Summary (meso)• Significant “mesoeconomic” diferences:• States’ per capita incomes dispersion increased in Mexico
but decreased in Brazil • Traded sector productivity is higher and increases much
faster than non-traded sector productivity in Mexico. In Brazil traded sector productivity is lower but catchs up with non-traded sector productivity • Large firms’ productivity increases much faster than small
and medium sized firms in Mexico . In Brazil, large firms’ productivity increases at the average rate for all firms• Informality is higher in Mexico than in Brazil, despite a
higher per capita income. Informality remained constant in Mexico while in Brazil it declined substantially
Summary (overall)• Mexico opened up its economy to trade and succeeded in developing a
first-class industrial sector in the country’s richer Northern region. A similar domestic economic integration didn’t occur. The dynamism of the large exporting firms in the North did not feed back to the non-traded, informal, small and medium-sized firms in the country’s poorer Southern regions. The consequence was a very low labor productivity growth rate • Brazil succeeded in reducing economic polarization in several
dimensions. The problem was that in contrast to Mexico’s her high-productivity large-manufacturing firms did not integrate into the world economy and thus saw their productivity growth slow down. This provided a weak lever to move the rest of the economy up, and the country lingered on in a low overall productivity path, except when the commodity lottery dictated otherwise.• Bottom line: integrate it both ways, domestically and internationally!