Semi-endogenous growth in a non-Walrasian DSEM for Brazil: Estimation and simulation of changes in foreign income, human capital, R&D, and terms of trade

Thomas Ziesemer ()

No 2022-013, MERIT Working Papers from United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT)

Abstract: In an empirical, dynamic simultaneous equation model (DSEM) for Brazil with 22 equations and variables, we show that foreign income is a driver of economic growth besides semi-endogenous technical change. With a balance-of-payments constraint and endogenous terms of trade, the major mechanism is (i) world GDP driving exports, (ii) exports paying for imported capital goods, which (iii) enter a production function increasing output and the foreign-debt/GDP ratio and (iv) increase the endogenous labour force, and (v) slightly reduce human capital growth. Permanent increases of human capital increase the R&D/GDP ratio, labour-augmenting productivity, and GDP. A policy to increase the R&D/GDP ratio leads to more human capital, labour productivity and GDP levels. Both knowledge policies reduce the debt/GDP ratio. A lasting shock on the terms of trade reveals that there is no Harberger-Laursen-Metzler effect. The results hold in the presence of endogenous terms of trade, foreign debt, net foreign income, and net current transfers from abroad, and non-Walrasian (dis-)equilibrium variables: inflation and changing inventories for the goods market, and unemployment in the labour market. Policy should strengthen the weak link from R&D to technical change and make education more attractive.

Keywords: dynamic simultaneous equation model; balance-of-payments; constrained growth; imported capital goods; foreign debt; human capital; R&D (search for similar items in EconPapers)
JEL-codes: F43 O11 O41 O47 O54 (search for similar items in EconPapers)
Date: 2022-04-12
New Economics Papers: this item is included in nep-gro and nep-int
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Citations: View citations in EconPapers (2)

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Journal Article: Semi-endogenous growth in a non-Walrasian DSEM for Brazil: estimation and simulation of changes in foreign income, human capital, R&D, and terms of trade (2023)
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