Economic Growth and Productivity in Brazil:

An Industry Perspective

(forthcoming GGDC research memorandum)

Gaaitzen J. de VriesGGDC and Faculty of Economics and Business

University of Groningen

Presentation at World KLEMSHarvard University, August 20, 2010

Introduction

• Objective:

• Measure and analyze multi-factor productivity growth in Brazil at the industry level.

• Policy context:– Import-substitution (roughly until 1980)– Intermediate period of debt crisis (1980-1990)– Washington consensus (1990-)

Labor productivitySource: Timmer, Marcel P. and Gaaitzen J. de Vries (2009),

"Structural Change and Growth Accelerations in Asia and Latin America: A New Sectoral Data Set“ Cliometrica, vol 3 (issue 2)

pp. 165-190. Figure from IADB (2010), The Age of Productivity:

Transforming Economies from the Bottom Up. Palgrave MacMillan.

Data (1) : National accounts

• GObas, IIpur, VAbas, COMP, GOS, TXSP• Industry deflators for GO, VA, and II

• Data availability:• 1980 – 1989: GGDC 10-sector database • 1990 – 1999: constant and current SUTs (43

industries)• 2000 – 2007: constant and current SUTs (55

industries)

• Additional data:– PIA (shares various industries 1990-1999)– PAC (shares 50t52)– PAS (shares 60t63, shares 71t95 1990-1999)

Data (2): Labor• EMP:• - 1980 - 1989: GGDC 10-sector database• - 1990 - 1999: SUTs (43 industries)• - 2000 – 2007: SUTs (55 industries)• EMPE:• 1990 – 2003: ratio EMP and EMPE from IOTs (43

industries)• Labor compensation:• COMP + compensation of self-employment (informal-formal

wage ratio estimated from PNAD)• Labor Quality (to be included):• - Decadal population census data• - Trend from household survey (PNAD)• Additional data for shares:• PIA, PAC, and PAS.

Data (3): Capital

• GFCF by asset type from NA/SUTs 1990-2007 in current and constant prices

• Software estimated from US software-hardware equipment ratio

• Investment coefficients by asset type and industry from the 2005 investment matrix for Brazil (Freitas et al. 2009)– Consistency with the national accounts is obtained using RAS

• Historical national accounts with GFCF by asset type in current and constant prices from 1901 onwards

• Initial capital stock is imputed using the steady-state assumption for the capital-output ratio (Easterly and Levine 2001)

Method

• Growth accounting methodology– Jorgenson and Griliches (1967)– Input-output framework: Jorgenson, Gallop, and

Fraumeni (1987)

• Detailed exposition of the methodology: Chapter 3 in Timmer, M.P., M. O’Mahony, B. van Ark and R. Inklaar (2010, forthcoming), Economic Growth in Europe, Cambridge University Press.

Preliminary results

Concluding remarks• Preliminary results suggest the following:

1. Substantial MFP growth in manufacturing after liberalization2. Low MFP growth in services industries

• Much further work needed:– Results are preliminary and should be carefully examined– Include labor quality– Distinguish between formal and informal employment at the

industry level– Extend time series backwards (difficult due to hyperinflation)