Structural change and productivity growth in Brazil: where do we stand?

ABSTRACT The aim of this paper is to discuss the evolution of the Brazilian labour productivity in the 1990s and 2000s to shed some light on the resilience of the Brazilian economy to recover growth. Labor productivity growth in Brazil, after showing positive annual rates between 1950 and 1979, became stagnant after 1980. Following McMillan and Rodrik’s (2011) methodology, this paper at first decompose labor productivity growth in the period 1950-2011, according to “structural change” (which is considered growth-enhancing) and “within effect” (which is growth-reducing, if not accompanied by significant structural change while the country is still pursuing its catching-up process). Next, an econometric exercised is presented to explain the determinants of the structural change component of the labour productivity since economic opening in the 1990s. The results show that the stagnation of the Brazilian productivity is explained by the overvaluation trend of the Brazilian currency, the reprimarization of the export basket, the low degree of Brazil’s trade openness and the high real interest rates prevailing in the period.