Do Human Capital and Institutional Quality Contribute to Brazil's Long Term Real Convergence/ Divergence Process? A Markov Regime-Switching Autoregressive Approach

This paper assesses Brazil’s real convergence (1822-2019) analysis unit root tests and Markov Regime-Switching (MS) models in three different scenarios: towards (i) other six Latin American countries (LA6); (ii) Portugal; and (iii) the technological frontier country, the US. The extended unit root test results favor Brazil's very long-run real convergence towards LA6 and Portugal, but not the US. The estimated MS models, involving two different regimes, real convergence and real non-convergence/ divergence, capture human capital's positive effect in promoting Brazil's real convergence to other LA6 EEs. Institutional quality emerges as growth-enhancing when Brazil is in a real convergence regime