Structural transformation and labor productivity in Brazil

Costa, Daniela; Marcolino, Marcos

doi:10.5935/0034-7140.20210020

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Artigos • Rev. Bras. Econ. 75 (04) • Oct-Dec 2021 • https://doi.org/10.5935/0034-7140.20210020 copy

Structural transformation and labor productivity in Brazil^* * We are indebted to V. V. Chari, Larry Jones, Tim Kehoe, and Chris Phelan for invaluable comments. We also thank participants at the 2018 Brazilian Econometric Society Meeting, the 2019 Society for the Advancement of Economic Theory, the PWBM’s Computational and Macro Seminar, and the FUCAPE seminar. Marcos Marcolino gratefully acknowledges the Bundesministeriums für Bildung und Forschung (German Federal Ministry of Education and Research) for financial support (ROCHADE: 01LA1828A).

Authorship SCIMAGO INSTITUTIONS RANKINGS

This paper examines the labor reallocation across agriculture, manufacturing, and services, and their impacts on aggregate labor productivity in Brazil from 1950 to 2010. We use a multisector model that features nonhomothetic preferences with constant elasticity of substitution and wedge distortions. This framework allows us to decompose the drivers of labor reallocation into supply-side, demandside, and wedges. For the 1950-2010 period, demand-side effects were responsible for most of the reallocation of labor away from agriculture towards manufacturing and services. On the other hand, if we focus only on the 1980-2010 subperiod, supply-side drivers become the major determinant for labor reallocation.

Keywords
multisector model; structural transformation; labor productivity

Period	first and last years levels (2005 local prices)	annual growth rate (period average)
1950-1980	5,704-19,216	4.04%
1980-2010	19,216-19,931	0.16%
1950-2010	5,704-19,931	2.08%

Summary statistic	Brazil	United States
Peak year	1983	1950
GDP per capita (Int’l $)	4,908	9,809
Manufacturing employment share	23.0%	33.4%

	Brazil			United States
	Agric	Manuf	Serv	Agric	Manuf	Serv
1950-2010	3.08	1.95	0.18	3.76	1.87	1.06
1950-1980	2.65	3.47	1.58	3.04	1.63	1.09
1980-2010	3.55	0.37	-1.24	4.48	2.07	1.01

	Labor	Supply	Demand	Wedge
1950-2010	0.0256	0.0084	0.0201	-0.0029
		(0.3295)	(0.7849)	(-0.1144)
1950-1980	0.0300	-0.0058	0.0335	0.0023
		(-0.1960)	(1.1171)	(0.0789)
1980-2010	0.0204	0.0225	0.0060	-0.0081
		(1.1034)	(0.2958)	(-0.3993)

	Labor	Supply	Demand	Wedge
1950-2010	0.0415	0.0215	0.0215	-0.0015
		(0.5187)	(0.5188)	(-0.0375)
1950-1980	0.0443	0.0078	0.0358	0.0005
		(0.1775)	(0.8101)	(0.0122)
1980-2010	0.0373	0.0344	0.0064	-0.0036
		(0.9237)	(0.1729)	(-0.0966)

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E-mail: rbe@fgv.br

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[1] *
We are indebted to V. V. Chari, Larry Jones, Tim Kehoe, and Chris Phelan for invaluable comments. We also thank participants at the 2018 Brazilian Econometric Society Meeting, the 2019 Society for the Advancement of Economic Theory, the PWBM’s Computational and Macro Seminar, and the FUCAPE seminar. Marcos Marcolino gratefully acknowledges the Bundesministeriums für Bildung und Forschung (German Federal Ministry of Education and Research) for financial support (ROCHADE: 01LA1828A).