Demand-led growth and functional income distribution in Brazil from 1952 to 2017

Avritzer, Joana David; Freitas, Fabio Neves Perácio de; Braga, Julia De Medeiros

doi:10.1590/0103-6351/5644

Joana David Avritzer

Instituto de Relações Internacionais e Defesa (IRID), Universidade Federal do Rio de Janeiro, Rio de Janeiro, RJ, Brazil

http://orcid.org/0000-0002-7039-9198

Fabio Neves Perácio de Freitas

Instituto de Economia (IE), Universidade Federal do Rio de Janeiro, Rio de Janeiro, RJ, Brazil

http://orcid.org/0000-0001-8499-111X

Julia De Medeiros Braga

Faculdade de Economia, Universidade Federal Fluminense, Niterói, RJ, Brazil

http://orcid.org/0000-0002-7743-0725

Joana David Avritzer - joanavritzer@gmail.com

Fabio Neves Perácio de Freitas - fnpfreitas@gmail.com

Julia De Medeiros Braga - jbraga@id.uff.br

	$u^{*}$	$g^{*}$
$μ$	$\frac{\partial u^{}}{\partial μ} = \frac{g_{π} π_{μ} - (\frac{u^{}}{v}) \frac{\partial s}{\partial μ}}{\frac{s}{v} - g_{u}} ƒ 0$ as $g_{π} π_{μ} ƒ (\frac{u^{}}{v}) (c_{w} - c_{k}) π_{μ} - (\frac{u^{}}{v}) b_{μ}$	$\frac{\partial g^{}}{\partial μ} = g_{π} π_{μ} + g_{u} \frac{\partial u^{}}{\partial μ}$ with $\frac{\partial g^{}}{\partial μ} > 0$ if $\frac{\partial u^{}}{\partial μ} \geq 0$ and, for $\frac{\partial u^{}}{\partial μ} < 0$ , $\frac{\partial g^{}}{\partial μ} ƒ 0$ if $\| g_{π} π_{μ} \| ƒ \| g_{u} \frac{\partial u^{*}}{\partial μ} \|$
$z$	$\frac{\partial u^{}}{\partial z} = \frac{g_{π} π_{z} - (\frac{u^{}}{v}) \frac{\partial s}{\partial z}}{\frac{s}{v} - g_{u}} ƒ 0$ as $g_{π} π_{z} - (\frac{u^{}}{v}) (c_{w} - c_{k}) π_{μ} + (\frac{u^{}}{v}) b_{z} ƒ 0$	$\frac{\partial g^{}}{\partial z} = g_{π} π_{z} + g_{u} \frac{\partial u^{}}{\partial z}$ with $\frac{\partial g^{}}{\partial z} > 0$ if $\frac{\partial u^{}}{\partial z} \geq 0$ and, for $\frac{\partial u^{}}{\partial z} < 0$ , $\frac{\partial g^{}}{\partial z} ƒ 0$ if $\| g_{π} π_{z} \| ƒ \| g_{u} \frac{\partial u^{*}}{\partial z} \|$

Papers	Author’s interpretation of the results	Interpretation of the result following Blecker (2002BLECKER, R. Distribution, Demand and Growth in neo-Kaleckian Macro Models. In: Setterfield, M. (ed.) The Economics of Demand-Led Growth: Challenging the Supply-side Vision of the Long Run, Aldershot, Edward Elgar, 2002.)
Bowles and Boyer (1995BOWLES, S.; BOYER, R. Wages, aggregate demand, and employment in an open economy: an empirical investigation. In: EPSTEIN, G.; GINTIS, H. (eds.) Macroeconomic policy after the conservative era. Cambridge: Cambridge University Press, p.143-71, 1995.)	Demand is profit-led in 3 countries and wage-led in 2 countries	Demand is profit-led in 3 countries and wage-led in 2 countries
Gordon (1995GORDON, D. Growth, distribution, and the rules of the game: social structuralist macro foundations for a democratic policy. In: EPSTEIN, G.; GINTIS, H. (eds.) Macroeconomic policy after the conservative era: studies in investment, saving and finance. Cambridge University Press, 1995.)	The result is not interpreted by the authors in these terms	Not applicable as the derivative is in terms of the profit rate.
Uemura (2000UEMURA, H. Growth, distribution and structural change in the post-war Japanese. In: BOYER, R. e YAMADA, T. (eds.) Japanese Capitalism in Crisis: A Regulationist Interpretation, Advances in International Political Economy. Routledge, 2000.)	Growth is profit-led from 1963 to 1971 and wage-led from 1976 to 1995	Demand is profit-led from 1963 to 1971 and wage-led from 1976 to 1995
*Stockhammer et al. (2009STOCKHAMMER, E.; ONARAN O.; EDERER, S. Functional income distribution and aggregate demand in the Euro area. Cambridge Journal of Economics, v. 33, p. 139-159, 2009.), Ederer (2008EDERER, S. Competition-oriented wage policies and its effect on effective demand in the Netherlands. WIFO Working Papers, n. 321, 2008.), Stockhammer and Ederer (2008), Stockhammer et al*. (2011)	Demand is wage-led in three of the papers and profit-led for one of the papers	Demand is wage-led in three of the papers and profit-led for one of the papers
Ederer and Stockhammer (2007EDERER, S.; STOCKHAMMER, E. Wages and aggregate demand: an empirical investigation for France. In: HEIN, E.; TRUGER, A. (eds.) Money, Distribution and Economic Policy: Alternatives to Orthodox Macroeconomics. Edward Elgar, 2007.)	Demand is profit-led	Demand is profit-led
Hein and Vogel (2008HEIN, E.; VOGEL, L. Distribution and growth reconsidered: empirical results for six OECD countries. Cambridge Journal of Economics, v. 32, p. 479-511, 2008.)	Growth is profit-led in 2 countries and wage-led in 4 countries	Demand is profit-led in 2 countries and wage-led in 4 countries
Hein and Vogel (2009HEIN, E.; VOGEL, L. Distribution and growth in France and Germany - single equation estimations and model simulations based on the Bhaduri/Marglin - model, IMK Working Paper, n. 4, 2009.)	Growth is profit-led in all economies	Demand is profit-led in all economies
Stockhammer and Stehrer (2011STOCKHAMMER, E.; STEHRER, R. Goodwin or Kalecki in Demand?Functional Income Distribution and Aggregate Demand in the Short Run. Review of Radical Political Economics, 2011.)	Demand is wage-led in 7 countries	Demand is wage-led in 7 countries
Onaran and Galanis (2012ONARAN, O.; GALANIS, G. Is aggregate demand wage-led or profit-led? National and global effects. International Labour Office (ILO) Publications: Conditions of Work and Employment Series, n. 40, 2012.)	Demand is wage-led in 9 countries and profit-led in the remaining 7 countries.	Demand is wage-led in 9 countries and profit-led in the remaining 7 countries.
Naastepad and Storm (2007NAASTEPAD, C. W. M.; STORM, S. OECD demand regimes (1960-2000). Journal of Post Keynesian Economics, v. 29, n.2, 2007.)	Demand is wage-led in 6 countries and profit-led in 2 countries.	Demand is wage-led in 6 countries and profit-led in 2 countries.
Hartwig (2013HARTWIG, J. Distribution and growth in demand and productivity in Switzerland (1950-2010), KOF Working Papers, KOF Swiss Economic Institute, n. 323, 2013.)	The effect of distribution on growth is profit-led.	Demand is profit-led.
Stockhammer and Onaran (2004STOCKHAMMER, E.; ONARAN, O. Accumulation, distribution and employment: a structural VAR approach to a Kaleckian macro model. Structural Change and Economic Dynamics, v. 15, p. 421-447, 2004.) and Onaran and Stockhammer (2004)	Distribution is not statistically significant in explaining growth.	Growth regime cannot be considered profit-led.
Bruno (2003BRUNO, M. Regimes de crescimento, mudança estrutural e distribuição na economia brasileira (1970-2001). Anais do VIII Encontro Nacional de Economia Política, 2003.)	Annual data from 1970 to 2001	Growth is profit-led from 1970 to 1990 and wage-led from 1991 to 2001
Araujo and Gala (2012ARAUJO, E.; GALA, P. Regimes de crescimento econômico no Brasil: evidências empíricas e implicações políticas. Estudos Avançados, v. 26, 2012.)	Annual data from 2002 to 2008	Profit-led growth

Data	Variable	Source
Wage share	$ω$	Marquetti and Porsse (2014MARQUETTI, A.; Porsse, M. Padrões de Progresso Técnico na Economia Brasileira: 1952-2008. Revista Cepal, 2014.) and SCN - IBGE
Real Gross Domestic Product	$Y$	Bacen and SCN - IBGE
Real Investment in Machines and Equipment	$I$	SCN-IBGE
Growth rate of income	$g$	Growth rate of $Y$
Growth rate of investment	$g_{I}$	Growth rate of $I$
Share of investment on output	$\frac{I}{Y}$	Calculated using data from Bacen and SCN-IBGE

Unit Root Tests (specification: with intercept and without tendency)	Statistics for the wage share ( $ω$ )	Statistics for the level of income ( $Y$ )	Statistics for the level of investment ( $I$ )	Statistics for income growth ( $g$ )	Statistics for investment growth ( $g_{I}$ )	Statistics for the investment share on income ( $\frac{I}{Y}$ )
ADF (p-value)	-3.300467** (0.0193)	2.989300 (1.0000)	0.35480 (0.9791)	-4.396086*** (0.0008)	-8.186934*** (0.0000)	-2.594725* (0.0992)
PP (p-value)	-2.737653* (0.0735)	2.521890 (1.0000)	0.096970 (0.9630)	-4.373835*** (0.0008)	-8.170031*** (0.0000)	-2.594725* (0.0992)
KPSS	0.082849	0.991346***	0.804409***	0.582210**	0.097305	0.398101*
ERS	0.363177**	861.7429	45.33912	1.497782***	2.866381**	4.415469
DF-GLS	-3.332607***	1.164959	1.150849	-2.714308***	-2.479604***	-2.030270**
Ng-Perron tests
Mza	-69.9781***	2.13466	2.25542	-12.7277**	-6.97326*	-7.19300*
MZt	-5.90683***	1.77952	1.32339	-2.43880**	-1.86436*	-1.89337*
MPT	0.36850***	61.3800	34.4576	2.24949**	3.52386*	3.41740*

	$ω$	$Y$	$I$	$g$	$g_{I}$	$\frac{I}{Y}$
Test ZA statistic	-3.513785	-3.75314	-3.443439	-5.568656***	-6.268119***	-3.499785
Structural Break Date for ZA	1994	2005	1980	1980	1975	1981
Test LS statistic	-4.895317	-5.506419*	-5.462867*	-5.534329***	-6.467034***	-5.075082
Structural Break Date for LS	1970 and 1992	1983 and 1991	1979 and 2008	1967 and 1974	1974 and 2004	1975 and 2004

	VAR (1)	VAR (3)	VAR (4)
Tests	Statistics (p-value)	Statistics (p-value)	Statistics (p-value)
Autocorrelation LM Test: LRE stat	74.55190 (0.3953)	78.54872 (0.2792)	77.79106 (0.2996)
Autocorrelation LM Test: Rao F-stat	1.022435 (0.4557)	1.084034 (0.3361)	1.057403 (0.4136)
Jarque-Bera	50.06742*** (0.0000)	24.92470*** (0.0004)	33.07934*** (0.0000)
Kurtosis	42.46689*** (0.0000)	21.05196*** (0.0001)	25.81562*** (0.0000)
Skewness	7.600534* (0.0550)	3.872747 (0.2755)	7.263718* (0.0640)
Test for Heteroscedasticity	111.3596*** (0.0000)	146.7662** (0.0489)	176.0611 (0.1297)

Null Hypothesis	Statistic (p-value)
$g$ does not Granger-Cause $g_{I}$	16.05839 (0.0029)
$g_{I}$ does not Granger-Cause $g$	3.251639 (0.5166)
$ω$ does not Granger-Cause $g_{I}$	0.741009 (0.8635)
$g_{I}$ does not Granger-Cause $ω$	0.918844 (0.9218)
$ω$ does not Granger-Cause $g$	2.876055 (0.5788)
$g$ does not Granger-Cause $ω$	1.474921 (0.8311)

Dependent Variable: $Y$	Estimated Coefficient (t Statistics)	Dependent Variable: $Y$	Estimated Coefficient (t Statistics)	Dependent Variable: $I$	Estimated Coefficient (t Statistics)
Intercept	253.86226*** (3.009112)	Intercept	12.6169137*** (3.763109)	Intercept	459.353237** (2.140962)
$ω$	-550.658877*** (-3.123037)	$I$	0.4861123*** (9.141782)	$ω$	-982.394897** (-2.210380)
$D_{1986}$	-367.992946*** (-3.450555)	$D_{1977}$	56.3694936*** (5.346747)	$D_{1982}$	-513.056733* (-1.992203)
Trend	7.049550*** (21.634288)	Trend	2.1763084*** (4.794293)	Trend	6.708186*** (6.970278)
$D_{T r e n d}$	3.651556*** (6.691218)	$D_{T r e n d}$	4.7109776*** (9.746213)	$D_{T r e n d}$	1.501280 (1.170849)
$D_{1986} * ω$	722.821423*** (3.297093)	$D_{1977} * I$	-0.1238535** (-2.182400)	$D_{1982} * ω$	846.321474 (1.574800)
GH test statistics	-3.303448	-3.104475		-4.530575

Null Hypothesis	Statistic (p-value)
$g$ does not Granger-Cause $\frac{I}{Y}$	2.83696 (0.0142)
$\frac{I}{Y}$ does not Granger-Cause $g$	0.80638 (0.6011)
$ω$ does not Granger-Cause $\frac{I}{Y}$	1.11130 (0.3776)
$\frac{I}{Y}$ does not Granger-Cause $ω$	0.75711 (0.6417)
$ω$ does not Granger-Cause $g$	0.86972 (0.5494)
$g$ does not Granger-Cause $ω$	1.04241 (0.4211)

Dependent Variable: $\frac{I}{Y}$	Estimated Coefficient (t Statistics)
Intercept	3.053846 (1.315583)
$g$	0.043124* (1.708168)
${(I / Y)}_{t - 1}$	0.784985*** (9.455613)
$D_{1995}$	2.068298*** (2.793065)
$ω$	-4.250739 (-1.003711)
Breusch-Godfrey Serial Correlation LM Test	0.952157
Breusch-Pagan-Godfrey Heteroskedasticity Test	0.545550
ARCH Heteroskedasticity Test	2.641954

[1] Joana David Avritzer - joanavritzer@gmail.com

Null Hypothesis/ Test Statistics	$r \leq 1$	8.66
Null Hypothesis/ Test Statistics	$r = 0$	25.63**
Structural Break Date	1995

Brasil

Brasil

Demand-led growth and functional income distribution in Brazil from 1952 to 2017

Crescimento liderado pela demanda e a distribuição funcional da renda no Brasil de 1952 a 2017

Abstract