Econometric estimation of labor productivity in the brazilian manufacturing sector in the 2000s:

Abstract

In the 2000-2008 period, which covers the analysis of this paper, while the average real GDP growth in Brazil was 3.7 percent per year, labor productivity in the manufacturing industry had a negative variation of 1.0 percent per year. In Brazil, there has been a “cliché” evaluation of the relatively low economic growth rates in the period as being the result of low labor productivity growth in the last few decades. However, according to the so-called Kaldor-Verdoorn law, the reverse could also be true: low growth rates of labor productivity in Brazil could be an effect of low growth rates of the real GDP. Based on Kaldorian assumptions, we regressed the change in labor productivity of 21 Brazilian manufacturing industries, covering the 2000-2008 period, on three main variables: the real GDP (which captures the Kaldor-Verdoorn law), gross investment to value added ratio, and technological innovation. Our results confirmed the validity of the Kaldor-Verdoorn law, as the real GDP growth was the most significant variable to explain the behavior of labor productivity in the manufacturing industries in Brazil in the 2000s, followed by the gross investment rate.