1. Economic Growth and Productivity in Brazil: An Industry Perspective (forthcoming GGDC research memorandum) Gaaitzen J. de Vries GGDC and Faculty of Economics and Business University of Groningen Presentation at World KLEMS Harvard University, August 20, 2010

2. 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-)

3. Labor productivity Source: 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.

4. 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)

5. 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.

6. 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)

7. 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. OMahony, B. van Ark and R. Inklaar (2010, forthcoming), Economic Growth in Europe, Cambridge University Press.

8. Preliminary results

9. Concluding remarks Preliminary results suggest the following: 1.Substantial MFP growth in manufacturing after liberalization 2.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)