Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/326822 
Year of Publication: 
2022
Series/Report no.: 
UNU-MERIT Working Papers No. 2022-013
Publisher: 
United Nations University (UNU), Maastricht Economic and Social Research Institute on Innovation and Technology (UNU-MERIT), Maastricht
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.
Subjects: 
dynamic simultaneous equation model
balance-of-payments
constrained growth
imported capital goods
foreign debt
human capital
R&D
JEL: 
F43
O11
O41
O47
O54
Creative Commons License: 
cc-by-nc-sa Logo
Document Type: 
Working Paper

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