Productivity Growth and Sectoral Interactions under Domar Aggregation: A Study for the Brazilian Economy from 2000 to 2014

Abstract

In this paper, we use the Domar aggregation approach to study the evolution of productivity growth in Brazil from 2000 to 2014, thus allowing us a disaggregated assessment of the issue. We found that the overall performance of the Brazilian economy can be explained not only by the poor performance of its sectors but also in terms of diminishing industrial density, with fewer backward and forward connections amongst industries in terms of chains of intermediate inputs. Besides, despite the relatively high density of the manufacturing sector, it performed a negative role concerning aggregate productivity growth both directly and indirectly. Directly insofar as that sector had negatives productivity growths during the period under consideration, and indirectly due to its high interconnection, which spread negative rather than positive productivity gains across the economy. Therefore, to improve the poor performance of the Brazilian economy, it is mandatory to restore the capability of the manufacturing sector of yielding and spreading productivity gains.