Manufacturing production as a source of growth: the case of Portugal

Abstract

The aim of this paper is to test the relationship between manufacturing production and economic growth in Portugal from the 1950s to the present day, following Nicholas Kaldor’s (1908–1986) thinking, which assumes that manufacturing is the true engine of the economic activity of a country. By estimating a series of econometric models, including a Vector Autoregressive (VAR) model, it was possible to identify a positive relationship between growth and manufacturing production since the 1950s. The results also show that each increase of 1 percentage point (pp) in real growth rate of the production of basic metallurgical industries and manufacture of metallic products in a certain year t−1 for the period 1956–2019, caused an increase of 0.07 pp in the Portuguese economic growth during a following year t on average. We hope that these findings will stimulate new and interesting research regarding the important issues of manufacturing production and economic growth.