Abstract
Brazil achieved a relatively high economic growth in the early 2000s, when the world scenario was favourable for the Brazilian trade balance. Under that scenario, an incomes policy , focused on real increases in the minimum wage along the business cycle, was undertaken, with positive consequences for the country’s economic performance. However, the Great Recession (GR) that emerged after the 2007–2008 Global Financial Crisis (GFC) brought challenges to the Brazilian economy, with unpleasant consequences for the country’s GDP growth, despite the incomes policy . The aim of this chapter is to analyse comprehensively the changes in the purchasing power of workers in the 2000s and during the GR, verifying whether it is a result of changes in productivity or due to changes in the real exchange rate . The theoretical background is the Kaleckian literature on income distribution and economic growth that accounts for the effects of wage share on economic growth, including the effects of productivity.
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Notes
- 1.
The period of analysis starts in 1997 to cover the changes that have taken place in the 2000s. The year 2014 is the latest year with available information for the Brazilian manufacturing sector.
- 2.
Real exchange rate is defined as PiE/Pd, where Pi is international price, E is the nominal exchange rate, defined as domestic units per foreign currency, and Pd is domestic price.
- 3.
For detailed information on the Brazilian financial account see Central Bank of Brazil (2017).
- 4.
In the rest of this chapter, currency appreciation is considered in real terms.
- 5.
The formalization of economic activities and the consequent increase in formal employment, at the same time the minimum wage was raised, incorporated part of the population to the consumption of durable goods because they had access to credit.
- 6.
- 7.
The term ‘regressive specialisation’ was suggested by Coutinho (1997). Regressive specialisation is understood in the Brazilian economy as a decrease in the degree of diversification and integration of the productive system with loss of density in several production chains due to higher imports of components and capital goods.
- 8.
The analysis starts from the south east Asian crisis to show that the manufacturing industry is very important for the Brazilian economy.
- 9.
Wage share is nominal wages in relation to the industrial transformation value to the workers directly engaged in production. Industrial transformation value is the difference between gross value of industrial production and costs of industrial operations.
- 10.
Increases in the real exchange rate occurred because the nominal exchange rate increased more than the difference between Brazilian inflation and the inflation of the trade partners, thereby making the Brazilian production more competitive internationally.
- 11.
The Growth Acceleration Program (PAC) is an infrastructure program of the Federal government of Brazil. The program was launched in 2007 under President Luiz Inácio Lula da Silva’s government with the objective of accelerating economic growth. This program continued in President Dilma Vana Rousseff’s administration, being called PAC-2. The planned investments were not fully implemented.
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Arestis, P., Baltar, C.T. (2017). Income Distribution, Productivity and Economic Growth: Empirical Evidence in the Case of Brazil. In: Arestis, P., Troncoso Baltar, C., Prates, D. (eds) The Brazilian Economy since the Great Financial Crisis of 2007/2008. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-64885-9_8
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