Understanding the Brazilian Economic Growth Regime: A Kaleckian Approach. Bruno Thiago Tomio FAE Blumenau. Resumo

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1 Underanding he Brazilian Economic Growh Regime: A Kaleckian Approach Bruno Thiago Tomio FAE Blumenau Reumo Denro da economia pó-keyneiana, uma da erene principai é formada por auore que conam com o eudo e ideia elaborada pelo economia polonê Michal Kalecki. A abordagem Kaleckiana é caracerizada por preocupaçõe com crecimeno econômico e diribuição de renda, enre oura caraceríica meno imporane para o preene eudo. O modelo Kaleckiano báico de diribuição e crecimeno ó permie economia wage-led. Baeado no eudo de Bhaduri e Marglin (1990), modelo de crecimeno Kaleckiano aprimorado foram eimado para diero paíe deenolido e algun em deenolimeno. Permiindo não omene regime wage-led ma, da mema forma, regime profi-led, noo aanço dee modelo reularam na aual dicuão obre reulado empírico. Io conraa o coneno na frene eórica, como apona Laoie (2011). Uando a écnica de equação única, ee arigo demonra que o regime de crecimeno econômico no Brail é wage-led, domeicamene e como uma economia abera. Políica pública êm ido ane influenciada foremene pela economia orodoxa, com um foco no regime de mea de inflação. Io êm falhado em proer um crecimeno econômico eáel, egualiário e uenáel. Políica que ejam mai realia ão precia para irar o Brail dea iuação, io é, um regime de crecimeno é neceário. The auhor i graeful o Eckhard Hein and Treor Ean for commening on an earlier erion of hi paper. The uual diclaimer i alo applied here; he ole reponible for any remaining miake i he auhor. 1

2 Abrac ihin po-keyneian economic, one of he main rand i compoed by auhor ha rely on he udie and idea elaboraed by he polih economi Michal Kalecki. The Kaleckian approach i characerized by concern oer economic growh and income diribuion, among oher characeriic le imporan for he preen udy. The Kaleckian canonical model of diribuion and growh only allow for wage-led economie. Baed on he udy of Bhaduri and Marglin (1990), improed Kaleckian growh model hae been eimaed for eeral deeloped counrie and a few deeloping counrie. By allowing no only wage-led regime bu a well profi-led regime, newer deelopmen of hi model hae reuled in an ongoing dicuion of he empirical reul. Thi conra he conenu on he heoreical fron, a poined ou by Laoie (2011). Uing a ingle-equaion echnique, hi aricle how ha he economic growh regime in Brazil i found o be wage-led, domeically and a an open economy. Policymaking ha raher been rongly influenced by orhodox economic, wih a focu on he inflaionargeing regime. Thi ha failed o proide a able, equiable, and uainable economic growh. Policie ha are more realiic are needed o ge Brazil ou of hi iuaion, i.e. an economic growh regime i needed. 1. Inroducion The ile of hi paper clearly ell much abou i. The aim i o earch for a deep underanding of he Brazilian growh regime from a Kaleckian perpecie. Howeer, no ju hi main goal i a he cope, oher goal are par of hi endeaor oo. The idea for hi reearch ared appearing during he Macroeconomic and Growh and Diribuion coure augh by Prof. Dr. Eckhard Hein. Indeed, hee coure hae demonraed ha here i a grea lieraure on empirical analyi of he economic growh regime from a po-keyneian perpecie for deeloped counrie, bu no for deeloping counrie. Conference and he Berlin Summer School promoed by he Reearch Nework Macroeconomic and Macroeconomic Policie (FMM) helped o reinforce hi idea. The heoreical Kaleckian growh and diribuion model, which omeime i called a neo-kaleckian oo, ha reached a conenu on i elaboraion, neerhele, empirical udie hae no arried a hi age ye (Laoie, 2011, p. 24). Lack of udie on Brazil and an ongoing debae hae been he main moiaion for hi reearch. The Kaleckian approach o growh and diribuion i one of he main rand of Po- Keyneianim (Laoie, 2011, p. 19). Thi branch or approach derie from he economic hinking of Michal Kalecki, an economi from Polland, who wa alo an economerician and inpired many early economeric udie on Keyneian heory (Laoie, 2009, p. 5). Hi heory make a naural liaion beween Marx and Keyne, and alo beween he economi of boh rand (Sardoni, 2011, p.118). An eenial feaure of he Po-Keyneian chool of hough i ha he economy i demand-led, i.e. upply merely adap o demand (Laoie, 2009, p. 15). Thi i a he core of Kalecki and Keyne heorie of effecie demand, which are ery imilar. Po- Keyneianim ha anoher key characeriic ha i hiorical and dynamic ime, a well a he feaure belonging o heerodox economic (Laoie, 2009, p. 15). 1 Kaleckian growh heory accoun for hee feaure and, according o Laoie (2009, p. 24) goe ery well wih economeric, ince Kalecki himelf wa an economerician. 1 See Chaper 1 of Laoie book (2009) for an in-deph explanaion. 2

3 The following chaper are diided a follow. Chaper 2 i keen o preen he baic Kaleckian diribuion and growh model a well a he Bhaduri and Marglin conribuion (1990) o hi model and i open economy deriaion. Nex, in he hird Chaper, he empirical analyi, i.e. economeric udy, i elaboraed. Policy implicaion of he reul found in he empirical model and he idea of he Kaleckian approach are pu forward in he fourh chaper. Laly, concluding remark are done in he final chaper. 2. Kaleckian diribuion and growh model According o Laoie (2011, p. 24), here i a conenu on he heoreical framework of Kaleckian growh and diribuion model, alhough no on empirical ground. Thi ecion ar wih he demonraion of a canonical Kaleckian model, ha i, a baic model. Afer hi inroducion o he model, a ecion i deoed o he conribuion of Bhaduri and Marglin (1990) o he Kaleckian approach; hi aricle i ofen referred o a he eminal paper (Hein and Vogel, 2008), which i reponible for he recen upurge of empirical udie wihin hi opic. The chaper conclude wih an aemen of he open economy model. ha i aimed here i o build on hi heoreical framework an empirical analyi o Brazil. 2.1 Canonical model I eem ha he fir model uing he Kaleckian approach o growh heory wa deeloped by del Mone (1975) in an aricle wrien in Ialian. Howeer, he main earlier baic erion of hi model are Rowhorn (1981) and Du (1984) (Du, 2012). The model deeloped by he laer i ued o exrac he canonical model for hi udy; wha follow i all baed on Du (1984) 2, and any ue of differen ource i going o be iible. Firly, a uual, ome aumpion are e o demonrae he modu operandi of he Kaleckian approach, and hen iue relaed o diribuion and growh are illuraed. For implificaion, only one indurial good i produced in he economy. In hi proce, capial and labor are fairly he ame and are he unique facor of producion. I i alo aumed ha, ia a Leonief producion funcion, here are conan reurn of cale and capial- and labor-oupu raio are fixed (boh raio are denoed and l, repeciely). In a paricular way, hee fixed coefficien migh be inerpreed a he exiing rigidiie in echnology for facor ubiuion, ha i, in pecial for ome underdeeloped economie, he choice of echnique are eleced eparaely of price. In he modeled economy, here i no problem of lack of worker ince here i eiher unemployed people or people may be employed ju o urial in a ecor ha doe no inerac wih he indurial ecor. Money wage i fixed, accouning a lea an amoun for ubience, and he labor upply i perfecly elaic. The implicaion of he laer i ha he demand for labor deermine he acual leel of employmen of i (L), in order ha L ly (1) where Y i oupu. A he ock of capial a a cerain period i he reul of pa inemen, and he exience of exce capaciy of capial i aumed in hi model, he acual employmen of capial (K) i gien by K Y (2) 2 I i relean o noice ha Du (1984) baed hi model o fi he characeriic of hi home counry, India (underdeeloped counry), which ui well he Brazilian cae oo. 3

4 Equaliy in equaion (2) would mean ha he economy i a he full capaciy leel of oupu. For he pricing equaion, i i conidered oligopoliic compeiion, in which he price leel (p) i e by applying a mark-up (m) 3 on uni prime co (wl), where w i he fixed money wage. Therefore, we hae p ( 1 m) wl (3) The mark-up i aumed conan a a cerain poin of ime and reflec he degree of monopoly power, which, following Du (1987), relae o he rae of concenraion of he indurial ecor and oher iue relaed o he organizaion of indurie. There are wo aumpion incorporaed o he mark-up pricing equaion. The fir refer o price-eing profile of firm in hi oligopoliic marke. Secondly, firm end o ignore capial co, hey raher e heir price relying on a mark-up oer prime co; hi i explained by he aumpion of exce capaciy in he indurial ecor. Coninuing wih he model, equaion (3) implie he equaion for he rae of profi (r): r mwly/pk (4) Two group are accouned in he model framework: worker and capiali. The former group pend all hey receie a wage (Kalecki, 1937). The laer, inead, conume and ae a conan par of heir income. Therefore, he equaion for oal conumpion demand in conenu wih he preened aumpion i hown a pc wl ( 1 ) rpk (5) where i he porion capiali ae. Een hough firm are managed by capiali, heir inemen and conumpion deciion are independenly conidered in hi baic model. Inemen (I) depend on he rae of profi and capaciy uilizaion 4, which may be wrien a I/K a br cu (6) where a, b and c are poiie conan. The fir one (a) i he well-known parameer for Keyne animal piri 5. A for he role of he rae of profi and he hird conan (c) enering equaion (6), when firm expec a higher profi hey are more willingly o ine. Neerhele, he model aume expeced and curren aerage rae of profi o be equal. A far a he econd one i concerned, here i a poiie relaion beween u (Y/K), which i he capaciy uilizaion meaured a a raio of curren oupu o poenial full capaciy oupu, and inemen. Thi econd erm may be inegraed o he fir or hird erm if i i argued ha deired capaciy uilizaion i aken a a conan or a funcion of he rae of profi. Thi i rue if firm conider ariaion in demand o eablih heir deired rae of capaciy uilizaion. Thu, when he curren u i aboe he deired leel, firm will ine o enlarge heir capial ock, and ice-era i rue. Laly, he drier of change in oupu i aggregae demand, and he equilibrium in he modeled economy i gien a Y C I (7) 3 Some noaion may differ lighly from he ource (Du, 1984) for an eaier comprehenion. 4 According o Du (2011b, p. 141), hi model preened in Du (1984) along wih he one preened in Rowhorn (1981) exclude lagged inemen, o curren and aimed inemen are alway he ame. The ame model imply ha here i diincion beween hor- and long-run. 5 Michal Kalecki and Joan Robinon, one of hi follower, were rong criic of Keyne General Theory (Keyne, 1936). A main diagreemen of boh i found on heir opinion abou he animal piri; albei agreeing wih lo of Kalecki argumen, Robinon ood a a upporer of i, whil he former wa hi own man (Harcour and Krieler, 2011, p. 160). 4

5 ih he inuiion o how how hi equilibrium i achieed, here i nohing beer han a figure o faciliae he explanaion. Figure 1 i almo he ame a he one preened by Du (1984); he erion preened here applie differen noaion and doe no include any demonraion of change in parameer. A a cerain poin of ime, he equilibrium i hown by hi figure, conidering boh markup and capial ock a gien: Figure 1. Modeled economy in hor-run equilibrium Source: Adaped from Fig. 1 in Du (1984). There are four main line hown in hree quadran: in he upper righ, AN and OM; in he lower righ, OR; and, lower lef, OP. From (4) and (3), he poiie relaion beween he rae of profi and oupu gie r m / 1 mu (8) ih a gien mark-up and capial (K), a r rie, oupu alo increae (boh are poiiely relaed). Thi relaion i hown wih he line ON in he lower righ quadran. Moing clockwie, in he lower lef quadran, equaion (1) i ploed (line OP). Moreoer, by ubiuing (8) in (6), I/K become a funcion of r and gie he line AN: I/K a b c1 m /mr (9) which aer ha I ha wo-ided effec: i i affeced firly by a rie in r, which affec i direcly, and econdly, ia an implied increae in he capaciy uilizaion rae. In he ame quadran a AN, he line OM demonrae real aing (S) diided by capial (K) a a funcion of he rae of profi (r) and reul from (5), producing S/K r (10) Thu, he equilibrium require ha I/K S/K g (11) 5

6 which derie from (7) muliplied by p, changing for p from (3) and pc from (5), and employing (1) and (4). The poin of inerecion of he line AN and OM gie hi equilibrium poin, which correpond o he alue I 1 /K or S 1 /K, r 1, Y 1 and L 1. Price (p) i independenly deermined from hi, and wih w gien, i imply come from (3). The equilibrium alue for he ariable r, Y and I/K are gien by r a/ b c 1 m /m (12) m /m a/ b c Y 1 1 m /mk (13) b c m /ma/ b c I/K a 1 1 m /m (14) Two characeriic mu peri o hold he equilibrium a rue: on he one hand, line AN and OM inerecion mu occur in he poiie quadran o he equilibrium exi, and on he oher, AN mu be flaer han OM o gie abiliy i. The wo fulfill hee condiion when a 0 (15) m/ m b c a 1 (16) which enure ha here i exce capaciy in he model. Condiion in (16) implie ha he reacion of aing o he deciion ariable hould be exceed, or equal o, he reponiene of inemen. Finally, regarding income and diribuion wihin hi model, he implicaion for each one of boh clae, capiali and worker, are conidered. A for he labor hare (or wage hare), wl/pq, a rie in ω improe income diribuion. Plugging in (1) and (3), he labor hare become 1/ (1 m) (17) Then i i clear ha income diribuion in he baic model i deermined uniquely by he markup; a decreae in m lead o an improemen in income diribuion. For he oher half of he opic, growh rae (g) may be imply defined a he rae of increae in capial ock, ince depreciaion of capial i no conidered in he model. Thu, hi implie g I/K (18) From equaion (8) and wih a gien m, i can be noed ha he rae of increae of Y and K are he ame, meaning ha g meaure a well he rae of change in oal oupu. Since ( I/K )/ m 0, hen g/ m 0 hold oo. Moreoer, following Du (2011a, pp. 66-7), here are hree main feaure of hi baic model ha mu be noed. Fir, by he increae of animal piri (alo known a auonomou demand), he line AN hif upward, which lead o higher equilibrium alue of g, r and u 6, and wih no change in real wage. Second, a higher aing rae of capiali () creae wha i known by he paradox of hrif (Keyne, 1936), ery probably becaue of he meaning of hi word (ha i, pruden ue of money and good). Thi paradox implie a roaion in he line OM, which yield maller equilibrium alue for he growh rae of he economy (g), rae of profi (r) and he rae of capaciy uilizaion (u). The hird feaure i called he paradox of co (Rowhorn, 1981): by reducing he mark-up (m), a higher real wage i achieed, wih a higher wage hare and a lower profi hare 7. From equaion (8) and wih a gien 6 here u i equal o Y/K and implying a new equaion, when K diide boh ide in equaion (13): m /m a/ b c u 1 1 m /m. 7 The profi hare (π) i equal o one minu he wage hare. 6

7 rae of profi, a higher capaciy uilizaion i implied by he reducion in m, which implie a well an upward hif in AN. hen hi line goe up, a higher g and r are achieed. Finally, increae in co lead o higher rae of growh and profi. Neerhele, noe ha hi only hold for he whole economy, no for a ingle firm (Laoie, 2009, p. 119). 2.2 Bhaduri and Marglin conribuion From Bhaduri and Marglin paper (1990), many empirical udie hae appeared due o he allowance of no only wage-led growh, which i he only oucome of he canonical model, bu alo profi-led growh. In addiion, here i a widepread ariey of economeric and empirical reearch on hi Kaleckian approach becaue Kalecki himelf wa an economerician, making he model more uiable o look for empirical eidence (Laoie, 2009, p. 24). One of he main change of in hi eminal paper relie on a new inemen funcion, which i deermined by animal piri, capaciy uilizaion and he profi hare (inead of he rae of profi). Therefore, he new equaion i gien by I/K a bu c (19) Ju noe ha he rae of profi i deermined by he profi hare, he capaciy uilizaion and he capial-oupu raio ( r u / ) (Hein and Vogel, 2008). Since hi model i a deriaion from he baic model, he preiou analyi made for he canonical remain almo unchanged. Excep for ome iue ha are going o be preened on he following. Firly, here are new equilibrium (*) alue for g and u, which can be wrien a * a c u π (20) b π ( a c ) * * g (21) π b where σ i he aing rae (preiouly hown in equaion (10)). Fir of all, he erm a in equaion (20) doe no need necearily o be poiie (>0), in comparion wih he baic model, in which i wa a main condiion for abiliy. Bu he numeraor ill need o be poiie, herefore, if a happen o be negaie he oher erm (cπ) ha o greaer han i o mainain a poiie numeraor. Thi i implied by he abiliy condiion of hi model, ha i, he lope of he σ need o exceed he lope of g. 8 Here come ino play maybe he mo imporan oucome of hi model, i.e. differen ype of demand and growh regime. Howeer, hi reearch only focue on he laer. To how he differen concep, le u ar by differeniaing boh equaion (20) and (21) wih repec o he profi hare, repeciely: 1 cb a u 2 (22) π b 8 1 g 1 If u, hen he abiliy condiion implie ha 0 b 0. I i beyond he cope of hi u u reearch o go ino deph in he dicuion of abiliy iue (for hi, ee Hein e al., 2011). 7

8 1 cb a g b c 2 (23) π b Thu, able 1 how he implicaion of hi model wih regard o differen ype of demand and growh regime. Table 1. Diinc concep of he effec on aggregae demand (u) and growh rae (g) Concep Verbal definiion Equaion age-led aggregae demand Capaciy uilizaion and profi hare u (agnaionim) are inerely relaed 0 Profi-led aggregae demand Capaciy uilizaion and profi hare u (exhilaraionim) are poiiely relaed 0 Capial accumulaion rae or he g age-led growh growh rae and profi hare are 0 inerely relaed Capial accumulaion rae or he g Profi-led growh growh rae and profi hare are 0 poiiely relaed Source: Adaped from Table 8.1 in Blecker (2002, p. 134). The able ill leae aide ha for he aggregae demand concep here i he diincion beween cooperaie and conflicie iuaion. More on how he reearch i conduced o accoun he claificaion of he growh regime in Brazil i going o be preened in he end of hi chaper, and furhermore, on he empirical par wih he eimaion raegy. 2.3 Open economy model The baic model and he new inemen funcion deried from he conribuion of Bhaduri and Marglin (1990) hae already been demonraed. In order o fulfill he explanaion of he heoreical model in order o carry i o he empirical analyi, he remaining miing par i o expand he model o capure foreign aciiy. To achiee o, he following i baed on he heoreical model hown in Hein and Vogel (2009). Fir of all, i i aumed a exogenou ariable: he price of foreign good, he nominal exchange rae, and he rae of expeced and foreign profi. Nex, he good marke equilibrium i going o incorporae expor and impor (he difference beween he former and he laer gie he ne expor). Therefore, planned aing (S) i equal o ne inemen (I) and ne expor (NX): S I X M I NX (24) hen equaion (24) i normalized by he real capial ock (K), i become quie imilar o equaion (11) bu wih differen noaion and he addiion of ne expor. g (25) where he good marke equilibrium i gien by he aing rae (σ = S/K), he accumulaion rae (g = I/K) and he ne expor rae (η = NX/K). Inead of ju aing ou of profi (preiouly capiali aing, ), worker aing ( ) are alo included. The following equaion i obained when conidering: [I] he profi hare i relaed o domeic demand, i.e. profi plu wage ( Π / Π Π / Y ), [II] he relaion beween oupu and poenial oupu i he 8

9 9 capaciy uilizaion (u = Y/Y P ), and [III] capial-poenial oupu raio a he capial ock diided by poenial oupu ( = K/Y P ). 9 u K Π Y Π K ) ( (26) Coninuing wih he remaining componen of equaion (24), he inemen funcion i he one preiouly hown, or raher, i i equaion (19). The ne expor rae i negaiely affeced by domeic demand and poiiely influenced by inernaional compeiiene, which i, in hi cae, he real exchange rae (e r ) 10 : u ψe r (27) The aing rae mu repond more elaically o change in capaciy uilizaion, he endogenou ariable, han he rae of accumulaion and he ne expor rae ogeher, in order ha abiliy of he good marke equilibrium hold in he model. Thi may be wrien a b u u g u 1 0 (28) Only on hee equilibrium, able good marke equilibrium and change in diribuion may be conidered. Conequenly, new equilibrium alue for he growh rae, g, and capaciy uilizaion, u, are gien a b e c a u r 1 * (29) c b e c a b a g r 1 * (30) Accordingly, capaciy uilizaion gie he equilibrium wih he gien producie capaciie and capial accumulaion how he expanion of poenial oupu or producie capaciie. hen differeniaed wih repec o he profi hare, boh equaion (29) and (30) yield, repeciely, b e u c u r 1 / / (31) b e b bu c c g r 1 / / / / (32) The repone of he capaciy uilizaion and accumulaion rae o change in he profi hare can be eparaely decribed becaue here i no an abolue effec in boh. For equaion (31), when profi are priileged by rediribuion, he numeraor how hree main effec. The fir affec i poiiely by he inemen demand (c), he econd i a negaie effec by mean of he conumpion demand [ u / ], and, laly, he nex effec relie on he ne expor, 9 Variable u and differ lighly from par 2.1 and 2.2, neerhele, a longer explanaion would how ha hey are he ame and hee change do no modify he main concluion. 10 Since he real exchange rae i no added o he empirical analyi of he curren udy, furher analyi of i i no pu forward in hi reearch. Alhough i i ued by Araújo e al. (2011) o analyze economic growh regime in Brazil, here i ill ambiguiy on how he exchange rae affec he profi hare (ee Hein and Vogel, 2008).

10 bu i i unknown in which direcion i could ake [ e / r ] 11. Regarding equaion (32), ery imilar iuaion o he one ju preened i found. In brief, hree effec on i numeraor: a poiie effec ia higher uni profi [ c / ], an indirec negaie or poiie effec ia c / bu / ] and anoher indirec capaciy uilizaion and conumpion demand [ poiie or negaie effec hrough ne expor [ b / ]. In a imple way, hi i he analyi of he equilibrium alue, and I hall gie a beer idea of wha hi reearch i aiming. In Po-Keyneian economic, he economy i demand-deermined. Thi empirical aemen of he growh regime in Brazil coni in analyzing he reul of a change in diribuion on conumpion, inemen and ne expor (aggregae demand componen), and a a reul on GDP growh. ihou giing deeper deail, becaue hi i preened nex on chaper 4, he main equaion for hi udy i Y Y C Y I Y NX Y (33) Ju o gie a broad idea, according o hi equaion, he economic growh regime i: Y Y Y Y wage-led, if 0, or, profi-led, if 0. The eimaion raegy of how o find if Brazilian economic growh i wage- or profi-led i preened in deail in he chaper 4. Neerhele, before ha he lieraure reiew confine he udie ha hae analyzed Brazil uing imilar mehod. 3. Lieraure reiew I eem ha he fir aemp o deermine a growh regime uing Bhaduri and Marglin approach (1990) i a paper by Bowle and Boyer (1995), in which hey apply he ingle equaion mehod (Hein and Vogel, 2009). Indeed, ince hen, here ha been an increae in he number of udie eing empirically he exience of differen ype of growh regime for many deeloped counrie 12 and only a few deeloping counrie. The mo plauible explanaion for hi dicrepancy i daa aailabiliy. hile for deeloped counrie daa for hi kind of udy i widely aailable, accouning for greaer period of ime, which i required for non-puriou imeerie economeric, here i grea lack of enough and official daa for almo all deeloping counrie. Sill, reearcher find a way o gaher good and reliable daa o look for he growh regime of deeloping counrie. A for Brazil, o my knowledge, here a lea hree main paper/udie: Bruno (2003), Araújo e al. (2011), Onaran and Galani (2011). Thi lieraure reiew coni in examining he reul and he economeric rucure/mehod of hee udie. Thee hree paper aim o how he ineracion beween diribuion, aggregae demand and accumulaion wih economeric ool. All earch anwering he queion of wheher he demand-led growh regime in Brazil i wage-led or profi-led, and hey all ue ingle equaion model. The fir udy examined here, and maybe he fir aemp o claify economerically he growh regime in Brazil, i Bruno (2003). The auhor propoe an analyi baed no only on economeric eidence, bu alo on macroeconomic daa, which he elaborae by himelf uing daa upplied by official Brazilian ource. Depie he fac ha he paper doe no gie any e r 11 See Hein and Vogel (2008) for more deail on he indeerminae effec of he hird effec. 12 For a recen lieraure reiew for deeloped economie, uing ingle equaion model, check Hein and Vogel (2008). 10

11 informaion on he economeric mehod, i only how he final reul, i i a pioneer udy. Neerhele, i lack of robune in i reul oo becaue he auhor elaboraed he regreion wih few oberaion (le han 20 in one cae, in he period from ). By diiding i period ino hree, he main reul may be ummarized a follow: [I] from 1945 o 1974, wage-led growh (reul obained wihou any economeric eimaion), [II] from 1970 o 1990, profi-led growh, and, [III] from 1991 o 2001, wage-led growh. The finding accomplihed by he auhor are ummarized in Table 2, joinly wih a ummary of he main finding by he oher wo paper. Bruno (2003) and Araújo e al. (2011) hae almo idenical heoreical model and eimaion raegy, maybe becaue he former auhor i a co-auhor of he laer. Apparenly, he laer how more robune in heir economeric model, ha i o ay, a lea i preen a ignifican number of oberaion (he period i , bu wih quarerly daa, inead of annually daa a preened by he former). hile conidering a cloed economy, wage-led growh i found for Brazil, howeer, when he model incorporae an open economy body, accumulaion regime i profi-led. Thi paper ha alo problem wih ranparency; i i no poible o idenify he mehod ued o eimae he equaion, or furher informaion abou i. In Onaran and Galani (2011), i i ery explici he raegy boh applied o heir ingle equaion approach. Error-correcion model (ECM) or eimaion in fir difference are ued, in order o make heir reul more robu. In addiion, lag are added, bu when hey urned o be inignifican, hey were excluded. I need o be menioned ha hey alo encounered problem while gahering daa. Alike he oher wo paper aeed aboe, all funcion are almo he ame, bu he ne expor funcion. The laer accoun for uni labor co and foreign and domeic good price; i i called he epwie approach 13. Laly, i eem ha he reul uffer from inufficien degree of freedom, maybe inalidaing or weakening he reul. Table 2. Oeriew of empirical udie on diribuion and growh in Brazil Auhor Funcion Growh regime Bruno (2003) Araújo e al. (2011) Onaran and Galani (2011) Saing: Inemen: Ne expor: Saing: Inemen: Ne expor: Conumpion: Inemen: Ne expor: S = f(π, ) I/K = f(r -1, u -1 ) NX = f(π -1, u -1, e -1 ) S = f(π, ) I/K = f(r -1, u -1 ) NX = f(π -1, u -1, e -1 ) S = f(π, ) I/K = f(y, π) NX epwie 12 Profi-led ( ) age-led ( ) age-led (cloed ec.) Profi-led (open ec.) [ ] * age-led (cloed ec.) Profi-led (open ec.) [ ] * Source: Auhor own elaboraion. Noe: Column named Funcion how he ariable ha were ued o reach he final claificaion. * For Araújo e al. (2011), quarerly daa, and for Onaran and Galani (2011), annual. Finally, depie imilar reul for Araújo e al. (2011) and Onaran and Galani (2011), Bruno (2003) obained differen reul for he recen year (from 1991 o 2001). A lea if differ from he laer becaue hey apply ery imilar period, bu wih lighly differen equaion. In Bruno (2003), only he rae of profi i aiically ignifican for hi period, excluding he aing and ne expor funcion. I i quie difficul o deal wih he comparion of hee udie wihou geing ino he deail of he robune of heir eimaion. If hi reearch were o conider only eimaion wih enough degree of freedom in he regreion, no much 13 More deail abou hi approach can be found in Sockhammer e al. (2009). 11

12 would be lef o conider. Nonehele, hi udy conider hem alid, and, a a reul, hey are going o be compared wih he finding in he nex chaper. Ju noe ha he hree are udie only publihed on conference and een, o he be of my knowledge. Therefore, hey are conidered work in progre, bu indeed hae conribued o expand he debae of differen demand-led growh regime in deeloping counrie. Thu, hi reearch aim i o ry o bring more fuel o hi debae, epecially, and almo uniquely, for he Brazilian cae. In he nex chaper, an exploraion of he empirical analyi employed for Brazil in hi udy i preened. 4. Empirical analyi for Brazil In hi chaper, he core of hi reearch i locaed. No ha he oher chaper are le imporan, on he conrary, hey are ery imporan oo becaue wihou hem here would be no empirical model or implicaion of he finding here. I i ju ha here lie he ronge conribuion o he debae abou differen growh regime in a Po-Keyneian (Kaleckian) approach, and, wih pecial imporance, an analyi baed on a deeloping counry, which i quie rare in he academic lieraure of hi opic. There are wo main ecion in hi chaper. The goal of he fir one i o deail he mehod applied in hi empirical analyi. Thi i where he eimaion raegy i aeed, and economeric e, e.g. uni roo and coinegraion e, are compued. Nex, ecion 4.2 how he final eimaion of he elaboraed model for each funcion of he aggregae demand and conclude wih he ype of demand-led growh regime found for Brazil. Before coninuing o he nex ecion, Table 3 diplay full informaion abou he daa gahered for hi reearch, which accoun for he period Table 3. Variable noaion, decripion, and ource Noaion Decripion Source Y GDP, real IPEA (2012) C Final conumpion, real IPEA (2012) I Inemen, real IPEA (2012) NX Ne expor, real (equal o Expor minu Impor) IPEA (2012) π Profi hare Marquei (2011) age Marquei (2011) Π Profi Marquei (2011) Y f Foreign GDP, real (equal o US GDP) BEA (2012) Noe: C, I and NX were obained a a hare of GDP. Then, hee ariable were conered o real ariable by muliplying hem by Y. The profi hare (π) i equal o one (1) minu he wage hare. I i no ye publihed, bu i wa obained direcly from he auhor (Marquei, 2011). age () were calculaed by imply muliplying Y by he wage hare; profi (Π) were calculaed a minu Y. Finally, Y f i equal o he GDP of he bigge rade parner for Brazil, which i, in hi cae, he US. Due o daa aailabiliy, he GDP of he European Union wa no added o i, hi would imply a ignifican lo in oberaion. I need o be reed ome auxiliary informaion on he calculaion of he wage hare by Marquei (2011). The daa upplied by him i an updae of he daa found in Marquei e al. (2010). The focu of hi aricle i he profi rae, howeer, from i decompoiion i poible o obain he profi hare. More deail on he way hey calculaed and creaed hi daabae are in he Appendix of Marquei e al. (2010). In Figure 2, a ime-erie plo of he ariable i preened. 12

13 Figure 2. Plo of he ariable ued in he empirical analyi, Source: Elaboraed by he auhor uing daa upplied by he ource decribed in Table 3. Noe: For all ariable alue are in Brazilian real (R$), excep for he profi hare (π), ne expor a a hare of domeic GDP, and foreign GDP (Y f ), which are, repeciely, raio and in billion of US dollar (US$). Beide he profi hare and he ne expor a a hare of GDP, all ariable how an upward rend from 1956 o In addiion, depie he uniform riing moemen of ariable Y, C and Y f, alhough wih ome maller ocillaion hroughou he period, oher ariable how more abrup break and deere furher commen. A for inemen i concerned, here wa a boom in inemen from he lae 1950 unil he beginning of he Thi wa moly due o he proce of impor ubiuion indurializaion (ISI), which fir focued on indurial good and laer on inermediae good, while deeloping a well he infrarucure in Brazil, e.g. maie public inemen in energy producion (Marquei e al., 2010; Baer, 2008, p. 385). High inflaion ranferred inemen from radiional ecor (agriculure and indury) o erice in he 1980 (Baer, 2008, p. 391). The 1980 alo accouned for he deb crii, wih ubanial drop in he amoun of domeic and foreign aing (Baer, 2008, p. 89). In he lae 1980 and he early 1990, i wa a period of hyperinflaion and increae in conumpion 13

14 pending fueled newer inemen. I i noeworhy ha due o he flow of moneary reource from he producie ecor of he economy o he domeic financial yem (i hare in he GDP more han doubled in he 1980), a harp drop in inemen occurred in he beginning of he 1990 (Baer, 2008, p. 119). Thi period of hyperinflaion affeced and agnaed profi (Π) in hi ame period. In fac, much of he analyi done for he inemen i alo applicable for he oher ariable ha how break in he upward rend. The launch of he Real Plan (Plano Real) releaed a new currency and opped he hyperinflaionary proce. A hi ime, he profi hare regained he loe caued by inflaion in he preiou period, and remain able o far, a around The ceae of high inflaion came wih a co. Becaue of he fully neoliberal agenda adoped, Brazilian economy failed o regain he dynamim (Marquei e al., 2010) demonraed in he middle of he weny cenury. In Lula goernmen (ook office in 2003), inemen and wage how a rapid increae. Srong commimen o orhodox policie, which made enrepreneur happy o coninue ineing ha foered wage, and income policie conribued o he ucce of Lula erm 14. Neerhele, hi approach of growing he pie o rediribue laer wa problemaic (ee Baer, 2008, p. 174). La bu no lea, a few word on he ne expor. In he ISI period, Brazil ended o ban impor of any good, and by doing hi, i waned o upply i domeic marke wih anyhing i needed. In hi period, expor, and inernaional rade in general, were negleced, puing he counry in a riky balance-of-paymen poiion. From he end of he 1960 unil he early year of 1980, exchange rae problem and an ouward-looking policy, aiming a more open economy, caued maie inflow of impor (primary maerial, inermediae and capial good, ha were being forbidden by he ISI program). During he 1980, in order o eae he effec of he deb crii, expor-oriened policie were pu in acion; many impor rericion were alo lifed. All oer he 1990, flucuaion and defici were eemed becaue of he re-opening of he economy (Baer, 2008, pp ). A boom in commodiy price, mainly drien by China growh, mark he beginning of he weny-fir cenury. The urplu ared collaping wih an increae in impored good. Finally, hee are ju commen o gie a broad idea, wihou going ino he deail of he conequence for income diribuion, on wha happened in he Brazilian economy during hee year. 15 Nex ecion carrie on wih ome deail on he mehod ha i going o be applied in he model eimaion. 4.1 Mehod Baically, he mehod followed i called he ingle equaion approach. A ery clear explanaion of he deail of hi approach can be found in he Appendix of Hein and Vogel (2009), and hi par of hi udy follow hi paper and Hein and Vogel (2008). Thi reearch follow heir explanaion o demonrae how he ype of growh regime i deried from a demand-led growh and diribuion model. ihin hi line, each componen in he righ ide of equaion (33) i eimaed eparaely; laer hey are ummed up, afer calculaing he parial effec, o reach an anwer abou he claificaion of he growh regime. Thi differ from imulaion model ha accoun for poible deficiencie relaed o he fac ha in ingle equaion model he ineracion beween he demand componen are lef aide (Hein and Vogel, 2009). Neerhele, he ingle 14 Preiden Lula wa reeleced in 2006 and ayed in power unil Check Baer (2008) for a ery deailed and criical aemen of he economic hiory of Brazil. 14

15 equaion approach ha been widely ued in he lieraure, a i wa menioned in he lieraure reiew. Le u ar howing again he equaion (33) o moe on: Y Y C Y I Y NX Y (33) Following he reaon oulined earlier on he Kaleckian diribuion and growh model, he expeced ign for each componen of hi equaion are: C Y I Y NX Y Y Y 0, 0, (?)? (33a) In he end, here are wo poible reul for he growh regime, hown a Y Y Y Y I 0wage led II 0profi led (33b) Before coninuing o he final oupu of he model eimaion and he compuaion and explanaion of he parial effec for each componen, uni roo are compued o check wheher he ime-erie ariable are aionary or no. The e applied i he Augmened Dickey-Fuller e; ince a mall number of lag were e (only 1) 16, if he e wa compued wih no lag, hence i i a Dickey-Fuller e. The reaon for hi i ha he ofware 17 ued e down from he maximum lag order and chooe he be reul (ee Table 4 for he reul). Logarihm are added o linearize he ariable and o obain in he reul change in percenage. Table 4. Uni roo e Leel Difference Variable Specif. Sa. Lag Sig. Specif. Sa. Lag Sig. Order log(y) c, c * I(1) log(c) c, c *** I(1) log(i) c, c *** I(1) NX/Y c * I(0) π c c *** I(1) log() c, c *** I(1) log(π) c, c ** I(1) log(y f ) c, c *** I(1) Noe: In he column Specif. (Specificaion), c and are noaion for conan and rend, repeciely. For e aiic (Sa.), ADF (Augmened Dickey-Fuller) e aiic are hown when one (1) lag i added, and DF (Dickey-Fuller) e aiic when none (0) lag i added. In Sig. (Significance), *, **, and *** and for 10%, 5% and 1% leel of aiical ignificance, correpondingly. Leel how he e applied o he ariable in leel, and Difference for ariable differeniaed one ime. The order of inegraion i diplayed in he la column. The null hypohei for he uni roo e i ha here i preence of uni roo a he null hypohei. Conequenly, by no rejecing he null hypohei, he erie i no aionary and i mu be differeniaed once o become aionary, hu eliminaing puriou regreion. The order of inegraion (I) ae how many ime he erie wa differeniaed (Brook, 2008, p. 319 and 326). The only ariable ha wa no differeniaed, and i aionary in leel, i he profi hare. For he remaining ariable, he uni roo e ay ha hee ariable become aionary in fir difference, when he null hypohei in he uni roo e i rejeced. ih aionary ariable, he regreion are no going o preen puriou reul caued by he preence of uni 16 There i no ingle rule for he lag choice (ooldridge, 2009, p. 633). 17 The compuaional ofware operaed i grel erion 1.9.6, aailable a hp://grel.ourceforge.ne/. 15

16 roo, unle hey how a long-run relaionhip. To ole hi problem, Engle and Granger (1987) propoed a e for coinegraion, which i he idea behind hi long-run moemen in harmony beween he ime-erie ariable (Balagi, 2011, pp ). In order o aoid hi problem, hi e i compued and, when i he cae, an error-correcion model i eimaed o deal wih i Model eimaion The fir equaion o be eimaed i he conumpion funcion. Conumpion i a funcion of profi ( Π ) and wage (); ince he ariable are in logarihm, elaiciie are hown a reul. Oher repreenaion are: C f ( Π, ) (34) log C conan dlog Π dlog d 1 2 (35) where ε i he reidual of he eimaed equaion. Since he ariable are I(1), a coinegraion e wa compued o check for a poible long-run relaionhip (reul are hown in Table 5). Table 5. Coinegraion e for he conumpion funcion Te Te aiic () Criical alue (c) Reul Engle-Granger No coinegraion ( > c) Noe: Criical alue for hi e are aken from Paeron (2000, p. 332). The null hypohei (H 0 ) and for no coinegraion. Then, if i larger han c, H 0 canno be rejeced. ihou coinegraion, he model hall be eimaed in fir difference, wihou implying any drawback (Table 6 diplay he reul for hi eimaion). Table 6. Regreion reul for he conumpion equaion Variable Coefficien Sandard error p-alue (ig.) Conan α (***) α (***) Adjued-R D-aiic Addiional e Te Saiic p-alue Deciion Auocorrelaion No auocorrelaion hie e No homokedaiciy Breuch-Pagan No homokedaiciy ARCH(2) No heerokedaiciy RESET Righ pecificaion Noe: Significan wih *, **, and *** denoe 10%, 5% and 1% leel of aiical ignificance, correpondingly. All andard e performed for he regreion of he conumpion funcion poin o robu reul. Howeer, he coefficien are only howing he elaiciie. For example, α 1 how 18 Furher deail and proof of hi e and oher economeric procedure are no a he cope of hi reearch. Thi reearch obained reul by auming ha he weaker e of ime-erie aumpion pu by ooldridge (2009, pp ) hold a rue. 16

17 ha if profi increae by one percenage poin, here i an increae of around 0.46% in conumpion. Similarly, he ame increae in wage would increae conumpion by 0.48%. Since hi i ju an elaiciy, e.g. 2 C C/, he parial effec mu be calculaed o obain he conribuion of conumpion in GDP growh wih repec o a change in he profi hare. Thi i done uing he equaion gien a C Y C C 1 2 (36) Π where C, Π and are he mean of he ime-erie conumpion, profi and wage, repeciely. Table 7 how he calculaion gradually o reach he reul for he conumpion equaion. Table 7. Calculaion of he parial effec for he conumpion funcion C/Π C/ α 1 (C/Π) α 2 (C/) ( C/Y)/ π hen here i a one percenage poin change in he profi hare (i.e. a rediribuion from wage o profi), a reducion of 0.27% in he GDP growh conribuion of conumpion i found. Anoher remark i ha he propeniy o conume ou of wage i ignificanly higher han he propeniy o conume ou of profi, which confirm Bhaduri and Marglin conribuion (1990) (Hein and Vogel, 2008). Thi alo confirm he expecaion of he Kaleckian growh and diribuion model pu a he end of chaper 2. Onaran and Galani (2011) find a imilar reul for conumpion: I i a negaie alue bu much maller han he one find by hi reearch. Paper by Bruno (2003) and Araújo e al. (2011) may no be confroned wih he reul found now, ince hey do no calculae he parial effec. The econd equaion eimaed i he inemen funcion. Inemen i a funcion of he log of GDP, a a proxy for capaciy uilizaion (Y ) and he profi hare (π). In he ame way, a repreened in Hein and Vogel (2008), he rae of inere would hae o be included, bu hi i no poible for Brazil due o he lack of ufficien daa. Thu, fir aemp by hi reearch ued he following equaion: I f ( Y, ) (37) log I conan dlog Y d d 1 2 (38) All ariable in equaion (37) are I(1), conequenly, Table 8 how he reul for he Engle-Granger coinegraion e. Table 8. Coinegraion e for he inemen funcion Te Te aiic () Criical alue (c) Reul Engle-Granger No coinegraion ( > c) Noe: Check Table 5 for he deail of hi e. The e reul doe no yield a reul ha how he preence of coinegraion, ha i o ay, ariable are no moing ogeher in an upward rend. Reul of regreion baed on equaion (38) did no preen any plauible reul, een when lag of he independen and dependen ariable are added. Therefore, inead of he profi hare, hi udy changed i for he profi, a i wa already pu ino pracice by Hein and Vogel (2008, 2009) and Sockhammer e al. (2009). Thi approach may be gien a I f ( Y, Π) (39) log I conan dlog Y dlog Π d 2 1 (40) 17

18 Same a for he preiou inemen equaion, coinegraion e hae o be compued becaue he ariable are no aionary in leel, and reul are in Table 9. Table 9. Coinegraion e for he inemen funcion, ariable in equaion (39) Te Te aiic () Criical alue (c) Reul Engle-Granger Coinegraed ( < c) Noe: Check Table 5 for he deail of hi e. To correc for he preence of coinegraion, an error-correcion model wa eimaed, according o he explanaion in Brook (2008, pp ). Unforunaely, he oucome of he regreion did no how any reul ha fi he heoreical model. Laly, an alernaie model wa eimaed, uing a he dependen ariable inemen a a raio of GDP. (I/Y) (Hein and Vogel, 2009). The final eimaed equaion ake he following form, and reul are repored in Table 10: I I 1 conan 1dlog Y 2d 3 4d 1 Y Y 1 (41) Table 10. Regreion reul for he final inemen equaion Variable Coefficien Sandard error p-alue (ig.) Conan β (**) β β (***) β Adjued-R D-aiic Addiional e Te Saiic p-alue Deciion Auocorrelaion No auocorrelaion hie e No homokedaiciy Breuch-Pagan No homokedaiciy ARCH(4) No homokedaiciy RESET Righ pecificaion Noe: According o he RESET e, he pecificaion of he model i only adequae if a 5% leel of aiical ignificance i conidered. The dependen ariable i aionary in leel. Significan wih *, **, and *** denoe 10%, 5% and 1% leel of aiical ignificance, correpondingly I i no poible o calculae he parial effec of a change in he profi hare on he GDP growh conribuion of inemen becaue he profi hare i no aiically ignifican in he final model. Neerhele, reul how ha a one percenage poin increae in he GDP would increae he paricipaion of inemen in he GDP by 0.12%. Normally, increae in he profiabiliy of firm, meaured a he profi hare or profi, would hae a poiie effec in inemen (Hein and Vogel, 2009). Thi relaionhip i no found in hi reearch, neiher by Onaran and Galani (2011). Bruno (2003) and Araújo e al. (2011) find ignifican reul for hi equaion bu heir mehod are queionable. I eem ha due o rucural change in he Brazilian economy, ome break in he ime-erie could change he reul. Anoher imporan deerminan ha migh be lacking o make he regreion work i he rae of inere. ih one of highe real inere rae in he world, enrepreneur would no ine in Brazil wihou 18

19 conidering hee co. Finally, none of boh uggeion o ole he problem in he inemen equaion wa aken in accoun here becaue here wa no enough aailable daa o do o. The ne expor funcion i he la equaion eimaed. A demonraed earlier, he main ariable (dependen) i he ne expor a a raio of GDP. Thi ariable i aionary in leel, bu he oher ariable (independen) in equaion 42 need o be differeniaed once o become aionary. Therefore, any coinegraion e i inalidaed. A hown in Hein and Vogel (2009), he ne expor are a funcion of foreign GDP 19 and he profi hare. A oulined in he heoreical model, he parial effec of a change in he profi hare on he GDP conribuion of he ne expor preen an unknown ign; on he one hand, i may be poiie, and on he oher, negaie. NX f NX 1 conan Y Y Y Y 1d log 1 2d 3d log (42) Thi equaion repreen he one ha gae he be and more plauible reul of he aemp. Among hee, regreion uing he ne expor a he dependen ariable were ried, a well a expor and impor a a raio of GDP eimaed eparaely a dependen ariable. In addiion, for he independen ariable, lagged ariable were added o achiee beer reul (hee maneuer follow he ame ource menioned earlier). In Table 11, he reul for he eimaion of he ne expor funcion are diplayed. Table 11. Regreion reul for he final nex expor equaion Variable Coefficien Sandard error p-alue (ig.) Conan χ (**) χ (*) χ (**) χ (***) Adjued-R D-aiic Addiional e Te Saiic p-alue Deciion Auocorrelaion No auocorrelaion hie e No homokedaiciy Breuch-Pagan No heerokedaiciy ARCH(4) No heerokedaiciy RESET Righ pecificaion Noe: Een wihou preening auocorrelaion, he model wa eimaed o correc for i and heerokedaiciy o aoid any wih he addiion of one lag of he dependen ariable. Check noe on Table 6 for more deail on he procedure. The dependen ariable i aionary in leel. The reul are a expeced: [I] here i a negaie relaionhip beween ne expor and domeic GDP (lagged effec), when he laer increae by one percenage poin he former decreae by 0.13%; and [II] foreign demand i poiiely relaed wih ne expor, one percenage poin growh in he former rie he laer by 0.21%. Again, a for he conumpion funcion, all e confirm ha he reul are robu. The parial effec of he profi hare on he 19 Thi i gien by he oupu (GDP) of he bigge Brazilian rade parner. Oher regreion ried o add he GDP of he European Union and Argenina, boh on he op 3 of he bigge rade parner, bu none aemp howed reaonable reul. 19

20 growh inpu of he ne expor o GDP need o accoun for he lagged endogenou ariable, which can be obained wih hi equaion (Hein and Vogel, 2008): NX Y 2 (43) 1 4 Equaion (43) i equal o Howeer, when confroned wih he reul obained by Onaran and Galani (2011), hey find a poiie relaionhip beween ne expor and he profi hare; in hi reearch, he conrary i found. In he preened heoreical model, here i only one poible meaning for hi reul: he indirec effec of ne expor in equaion (32) i negaie (he erm i [ b e r / ]). There may alo be ome oher explanaion for hi negaie relaionhip. One explanaion for hi i ha during hi period many mulinaional companie hae inalled heir faciliie in Brazil no ju o profi from he expanding domeic marke, bu alo o obain cheap reource o expor good (Amal e al., 2009). Therefore, a an expor plaform for foreign companie, a negaie relaion beween domeic profi hare and ne expor i poible. Exchange rae oeraluaion, i.e. he Duch dieae (Breer-Pereira, 2010, p. 148), rapid financial liberalizaion (Caralho, 2008, p. 138), or inernaional compeiion, may be able o explain hee finding oo; a deeper analyi of hi would be neceary and i i no poible o do i a hi reearch, bu i would be a grea uggeion for fuure reearch. In concluion, wih all equaion eimaed and he parial effec aken, i i poible o claify he economic growh regime in Brazil from a Kaleckian perpecie. In Table 12, he parial effec of change in he profi hare on he GDP conribuion of conumpion, inemen and ne expor are added. Table 12. Final effec Equaion Value C ( Y ) ( Y I ) ( Y NX ) Y ( Y ) Noe: No ignifican reul wa found for he inemen equaion. From boh domeic and open economy perpecie, he demand-led economic growh and conribuion model for Brazil i characerized a wage-led. I i a quie rong final effec; an increae of one percenage poin in he profi hare decreae GDP by around 0.80%. Following a imilar comparion, he domeic effec of an increae of he profi hare by 1% reduce GDP by 0.27%. Thee finding conradic he reul found by Onaran and Galani (2011), in which Brazil i profi-led. The reul obained by Araújo e al. (2011) for he open economy i alo conradiced, howeer, for he domeic analyi boh udie claify Brazil a wage-led. For he pioneer udy of Bruno (2003), he reul are parially differen oo; on he one hand, Brazil i profi-led in he period from 1970 up o 1990, neerhele, on he oher hand, Brazilian economy i wage-led in a more recen period, from 1991 o In he nex chaper, policy implicaion are drawn upon hee finding. 5. Policy implicaion I i clear ha afer ucceie crie Brazil ha implemened policie o aoid inflaion a any co. Unil oday, economic policy ha a rong focu in conrolling inflaion; hi fear dae from 20

21 hyperinflaion ime. Thi approach o conrol inflaion a he co of economic growh and income diribuion ha caued imbalance in eeral macroeconomic indicaor. A heerodox aemp o conrol hi problem wa ried in 1986, wih conrol of price and wage policie, howeer, hi failed (Baer, 2008, p. 111). Inflaion canno be only economic policy e by he goernmen (Breer-Pereira, 2011). The orhodoxy ha ha reigned for o long in Brazil i no creaing he economic deelopmen ha i would be poible wih policie ha are more realiic. Kalecki defended ha he Sae mu hae an acie role in he economy (López G. and Aou, 2011, p. 191), and Brazil ha failed o do o, leaing he economy in he hand of he marke. Een recenly wih he elecion of he former rade union leader Preiden Lula, he hope of change in economic policie hae been defeaed by he fear (Arei e al., 2007, p. 63) of loing he uppor of financial marke and neoliberal iniuion. ha Brazil really need i an economic growh regime, no an inflaion-argeing regime (Arei e al., 2007, p. 63). Bu he hope i no dead ince Brazilian are geing more job and more income in Preiden Dilma erm. Higher minimum wage and low unemploymen are a way o gie ciizen a decen life, howeer, here i ill a lo o be done o hae a real deelopmen agenda (Balar, 2011, p. 71 and 74). hen bank are geing record profi year afer year and he real ecor of he economy ruggle o cach up and preen minimal economic deelopmen (for a counry wih he ize of Brazil), omehing i wrong. Indeed, financialiaion in Brazil ha negaiely affeced non-financial firm inemen (Branco, 2010). Powerful financial marke and iniuion and independen cenral bank hae gien he financial ecor a main role in he economy; hi conradic Kalecki analyi where he acie role mu be done by he real ecor, wih he financial ecor being paie (Arei and Skue, 2004, p. 25). A more acie goernmen could ep in and deelop an indurial policy a well a wih an income diribuion policy o bring back he acie role of he real ecor of he economy, he producie ecor. Thi i crucial for creaing real wealh and a more dignified ociey for eery Brazilian. The empirical reul for Brazil pu hi counry in a poiion for wage-led policie. Alhough Kaleckian growh and diribuion model do no leae aide key feaure of Po- Keyneian economic, like fundamenal uncerainy and pah-dependency, for example, a cerain fuure mu be foreeen o elaborae policie. I could be aid ha in hi ene policymaking i more ar han cience, hee model go again he idea ha unfeered marke wih no goernmen inerenion o achiee an ideal (i.e. equiable, uainable, and able) rae of growh (Du, 2010, p. 76). age-led policie would imply a growh raegy wih rediribuion of income from capiali (profi) o worker (wage). Therefore, hi ype of raegy need o regulae more he financial ecor wih pro-labor diribuion a a conequence of ocial and labor marke policie (Laoie and Sockhammer, 2011). Thi would be ery complex due o he deep-rooed inequaliy creaed by he paern of demand expanion from 1950 unil 1980, ha i, an expanion creaed by expene on luxury produc made feaible by an increaing income concenraion in he elie and middle cla (Oreiro e al., 2010). Afer 1980, orhodoxy preailed and could no impoe a raegy o reduce compleely hee harm. ih a crii come he be opporuniie, a people normally ay. Thu, maybe hi i he righ ime o eablih an economic growh regime wih wage-led policie. 6. Concluion In he fir par (chaper 2), an oeriew and inroducion o he canonical Kaleckian growh and diribuion model wa preened. There are wo main feaure of hi model ha conradic 21

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