Do demand and profitability stimulate capital accumulation? An analysis for Brazil

Abstract

This article tests whether the profit share of gdp and capacity utilization affect capital accumulation in Brazil in the period 1950-2008 (in the sense of Granger causality). The methodology developed by Toda and Yamamoto (1995) is used to verify the Granger non-causality hypothesis. The results show that capacity utilization "Granger-causes" capital accumulation in the Brazilian economy and, also that the profit share of gdp does not "Granger-cause" the national investment-capital ratio. This corroborates the Kaleckian proposal based on the fundamental role of the accelerator, and suggests that the Brazilian economy can grow with either a concentration or a de-concentration of income, provided a suitable institutional arrangement is in place.

An empirical test of the Post-Keynesian growth model applied to functional income distribution and the growth regime in Brazil

“…Following the Bhaduri-Marglin framework, we estimated a VAR model to investigate whether, between 1970 and 2008, the Brazilian economy was profit-led or wage-led. From this perspective, we followed certain empirical works which used the PKGM to provide certain insights about the Brazilian growth experience [Araújo and Gala (2012), Oreiro and Araujo (2013), Marrone (2015) and Feijó, Lamonica, and Bastos (2015) and (Feijó, Câmara, and Cerqueira 2015)]. The standard VAR model specification provided some evidence to conclude that both the growth regime and the demand regime of the Brazilian economy were profit-led during this period, insofar as a positive profit share shock affected both economic growth and capacity utilization rate in the same direction.…”

“…However, recently, a few papers have employed econometric methodologies to test the growth regime in Brazil, starting with a Post-Keynesian structure (Araújo and Gala 2012;Feijó, Câmara, and Cerqueira 2015;Feijó, Lamonica, and Bastos 2015;Marrone 2015;Oreiro and Araujo 2013). Table 1 summarizes this literature and demonstrates that the global results provided by the authors are not unambiguous: simply by examining these works, it is difficult to define the Brazilian economy as either profit-led or wage-led.…”

“…According to the definition proposed in the authors' theoretical model, during the period of exchange rate undervaluation, the accumulation regime was wage-led, while over the two periods of exchange rate overvaluation, it was profit-led. Marrone (2015) employed the Toda-Yamamoto approach to the Granger non-causality test in order to verify whether profit share and the rate of capacity utilization temporally precede capital accumulation and whether profit share temporally precedes capacity utilization in the Brazilian economy. He examined the period from 1950 to 2008 (annual data) and employed unit root tests prior to the statistical causality analysis.…”

Omitted-variable bias in demand-regime estimations: the role of household credit and wage inequality in Brazil

“…The ambiguity of results goes in line with Marrone's (2015) findings, namely that the functional distribution of income in Brazil does not Granger-cause capital accumulation , thus suggesting that growth and demand can increase either with a concentration or deconcentration of income.…”

Taxa de lucro e acumulação de capital no Brasil: concepções teóricas, análise histórica e relação de causalidade

“…Os resultados apresentados neste artigo são os mesmos de Fornari (2020). Morrone (2015) também realiza esse mesmo teste, porém entre taxa de acumulação de capital e seus componentes, a parcela dos lucros e a produtividade do capital. 20 Os resultados dos testes empíricos dos dois trabalhos são análogos.…”