An empirical test of the Post-Keynesian growth model applied to functional income distribution and the growth regime in Brazil |
| |
Authors: | Cleiton Silva de Jesus Ricardo Azevedo Araujo Carlos Eduardo Drumond |
| |
Institution: | 1. Department of Economics, State University of Feira de Santana, Feira de Santana, Brazil;2. Department of Economics, University of Brasilia, Brasilia, Brazil;3. Department of Economics, State University of Santa Cruz, Ilhéus, Brazil |
| |
Abstract: | The main purpose of this paper is to empirically investigate whether, between 1970 and 2008, the Brazilian economy was profit-led or wage-led. To this end, we approach a canonical post-Keynesian growth model (PKGM) to estimate certain vector autoregressive (VAR) models and perform Granger non-causality tests. Three main results are extracted from the generalized impulse-response functions provided by the VAR models. First, a positive profit-share innovation affects economic growth and capacity utilization rate, both in the same direction, suggesting a profit-led pattern. Second, a profit share shock positively affects both the ratio actual/potential output, and capital accumulation, reinforcing the previous result. Third, a capacity utilization shock is shown to positively affect both output growth and capital accumulation via the accelerator effect. On the one hand, the pairwise Granger non-causality test does not provide any evidence of causality running from profit share to economic growth or capacity utilization. On the other hand, there is some evidence of Granger causality running from profit share to capital accumulation. |
| |
Keywords: | Income distribution growth regime Brazilian economy profit-led wage-led |
|
|