Structural heterogeneity, and endogeneity of elasticites on the balance-of-payments constrained growth model

The aim of this paper is to demonstrate that, especially in developing countries, changes in the real exchange rate affect both the structure of production and the income elasticities of the demand for imports and exports – and, as a result, the balance-of-payments constraint to growth in the fashion of Thirlwall’s Law. If the latter is weakened, then these countries are able to reach a higher long-term growth rate. Thus, following Dosi, Pavitt e Soete (1990), we show how a devaluation of the real exchange rate affects an economy’s productive heterogeneity, by reducing its real wages. In addition, we demonstrate that the elasticities are endogenous, based on the argument that maintaining an undervalued exchange rate encourages research and innovation. This is due to its positive impact on self-financing conditions and on the access to credit, making it possible to modernise and diversify the structure of production. In the long-term, this implies an expansion of the export capacity and a reduction of the dependence on imports. Furthermore, based on Kaldor and Mirrlees (1962), we present a model that formalises the endogeneity of the elasticities by making them dependent on the average age of the capital stock of the economy. Lastly, we show how the approach suggested in this article is an improvement on the Structural Economic Dynamics (SED) approach, by demonstrating how variations in the real exchange rate alter the sectoral composition of the economy. In the final considerations, we present a series of arguments supporting the hypothesis that elasticities are endogenous to the real exchange rate.Balance-of-Payments Constraints, Real Exchange Rate, Structural Heterogeneity.

Trade liberalization and labor market in Brazil: impacts on employment and wages in tradeables and nontradeables sectors

The aim of this paper is to analyze the impacts of openness on employment and wages, taking into consideration two crucial aspects. The first, related to labor demand, refers to an increase in the relative employment of less-skilled workers. With Brazil being a developing country with abundant less-skilled labor, it can be expected – based on H-O-S – that income redistribution in favor of unskilled labor may occur after the trade liberalization. The second aspect is the impact on tradeables and non-tradeables. The H-O-S model implicitly admits tradeables goods only. However, the effect on the labor market is also felt on the non-tradeables sector. This aspect has been neglected in the analyses concerning this subject in the Brazilian economy. The conclusion raises the point that it is difficult to define any prevalence of labor demand shifts in the tradeables or nontradeables sectors. However, when the analysis is carried out after breaking down data based on levels of education, it is possible to conclude that the demand for unskilled workers increased after trade liberalization in Brazil. Nevertheless, demand shifts among sectors suggest that H-O-S framework does not explain the impacts of trade liberalization in Brazil, since the demand for skilled workers increased among the same sectors. This data, however, needs to be looked at with caution since the stabilization in Brazil (1994) changed income distribution by means and through the effects of an inflation tax and forced saving.Trade Liberalization; Employment; Wages; Labor Market

Financial system, innovation and regional development: a study on the relationship between liquidity preference and innovation in Brazil

This paper discusses and assesses the features of the Brazilian Financial System, as well as the impacts of Liquidity Preference on Credit and Regional Development in Brazil. Precisely, we test the relationship between credit and development, and the role of banks in regional development. We estimate a panel across states in Brazil in order to test the impact of liquidity preference and other financial variables on Brazilian states credit level. We have also tested the relationship between liquidity preference and other financial variables across states and the number of patents, aiming at testing the importance of technology and innovation on regional development by means of bank system. Conclusions confirm both hypotheses.Monetary System, National Innovation System, Credit

Financial system, innovation and regional development: a study on the relationship between liquidity preference and innovation in Brazil

This paper discusses and assesses the features of the Brazilian Financial System, as well as the impacts of Liquidity Preference on Regional Development in Brazil. In the post-Keynesian literature, money is considered endogenous to the economic system, introduced in the economic activity through the credit provided by banks. Taken as non-neutral, banks are economic agents which can present lower or higher liquidity preference. Because of that, banks are also particularly important to the development process. Precisely, we tested the influence of credit and the role of banks in regional development. We estimate a panel across states in Brazil in order to test the impact of liquidity preference and other financial variables on Brazilian states’ number of patents, aiming at testing the importance of the bank system to technological progress and regional development. Conclusions confirm both hypotheses.Monetary System, National Innovation System, Credit, Brazil

Knowledge externalities and growth in peripheral regions: introductory notes

The aim of this paper is to discuss the idea that knowledge externalities, as discussed in the Endogenous Growth Theory, can be spread over any kind of space. Although this point has already been discussed by some scholars in the heterodox tradition (Nelson, 1998, Martin and Sunley, 1998, among others), we would like to bring into discussion a new perspective that analyses the validity of this assumption in peripheral regions/countries. It will be argued that there are some peripheral structural conditions that constrain the generation, transfer and absorption of knowledge externalities. Above of all, it will be argued that the construction of “space” in the periphery is determinant for the absence of widespread diffusion of this kind of externality. This conclusion implies that the generality of the New Growth Theory is very difficult to be assumed.

Capital mobility, balance of payments constraints, and economic growth: an empirical dynamic analysis

This paper analyses empirically the relationship between economic growth and the openness of the financial account of the balance of payments. It takes into consideration the balance of payments’ constrained growth, as well as the difficulties in the empirical literature in measuring capital mobility. Starting from the capital mobility index we estimate a panel across 80 countries, both developed and developing between 1997-2003. Results suggest that more capital mobility in developing countries affects growth negatively, whereas it possibly stimulates growth in developed countries.Economic Growth, Capital Mobility, Dynamic Panel

Independência e autonomia do Banco Central: mais sobre o debate [Central Bank independence and autonomy: more on this debate]

The aim of this paper is to analyze critically the Independence of Central Banks (ICB). By presenting the theoretical arguments that support the independence, as well as some empirical studies regarding this topic, we introduce the main critical concerns about the argument of ICB. Besides, we set the most striking aspects of the effectiveness of the Independence of Central Banks as a "panacea" for solving the inflationary pressures in developing countries. Conclusions highlight the limits of ICB in countries with high external constraints such as Brazil.central bank; central bank independence; Brazil

Restrição externa, câmbio e crescimento em um modelo com progresso técnico endógeno

The aim of this paper is to present some preliminary considerations of the relationship between exchange rates, external constraints and economic growth from a formal model that considers two regions, one developed and other developing countries, which interact via international trade. It is assumed that the external constraint acts on the developing economy and that it is affected by exchange rate policies, to the extent that changes in these policies affect the functional distribution of income and, therefore, the decisions of the planned spending on business innovation. The findings go to show that devaluations have a positive effect to relax the external constraint in this region.External constraints, Economic growth and Exchange Rates

Increasing returns to scale and international diffusion of technology: an empirical study for Brazil (1976-2000)

This article aims at exploring the empirical evidence regarding the effects of increasing returns to scale and international technological diffusion on the Brazilian manufacturing industry. Our departure point is a Kaldorian-type theoretical model that provides not only the positive effects of scale but also of diffusion on industrial performance. We use Vector Auto Regressive (VAR) for testing the model. VAR will estimate the coefficients related to industrial output, labor productivity, exports and the technological gap between the United States and Brazil. This technique also provides simulations for the short-term and long-term trajectories under exogenous shocks. The observations are on a three-month period basis and the sampling period runs from the second half of 1976 to the second half of 2000. The conclusion highlights both evidences of increasing returns on the Brazilian industry that faces, however, some structural constraints. Besides, the model also reveals Brazil's difficulties to catch uptechnological gap; increasing returns to scale; economic growth; Brazil