Growth and stagnation in a dual economy: The case of Brazil

Carmem Feijo, Marcos Tostes Lamonica () and Sergiany da Silva Lima ()
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Marcos Tostes Lamonica: Fluminense Federal University, Rio de Janeiro, Brazil
Sergiany da Silva Lima: Federal Rural University of Pernambuco (UFRPE), Brazil

PSL Quarterly Review, 2022, vol. 75, issue 301, 119-138

Abstract: This paper shows that the stagnation of the Brazilian economy is the result of a vicious cycle of growth, mainly due to premature deindustrialization caused by a growth strategy centered on foreign savings. This strategy implies financial integration, which, in an asymmetric international financial system, narrows the policy space and limits the implementation of developmental policies. Therefore, capital accumulation and technological change do not move along the time to promote the productive transformation that would reduce structural heterogeneity, relax external constraint and improve labour market conditions. In this sense, the paper presents an interpretation for the stagnation of the Brazilian economy, which draws from Kaldor’s theoretical contributions to discuss structuralism and new developmentalism. The paper also shows the results of an econometric exercise based on the circular cumulative causation model for the 1950-2019 period. Based on these results, it can be determined that domestic absorption is the main driving factor of the dynamics of the Brazilian economy.

Keywords: Structural change; cumulative causation; dual economy; new developmentalism; Brazil (search for similar items in EconPapers)
JEL-codes: F43 F45 O11 O14 O17 (search for similar items in EconPapers)
Date: 2022
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