Increasing returns to scale and international diffusion of technology: an empirical study for Brazil (1976-2000)

This article aims at exploring the empirical evidence regarding the effects of increasing returns to scale and international technological diffusion on the Brazilian manufacturing industry. Our departure point is a Kaldorian-type theoretical model that provides not only the positive effects of scale but also of diffusion on industrial performance. We use Vector Auto Regressive (VAR) for testing the model. VAR will estimate the coefficients related to industrial output, labor productivity, exports and the technological gap between the United States and Brazil. This technique also provides simulations for the short-term and long-term trajectories under exogenous shocks. The observations are on a three-month period basis and the sampling period runs from the second half of 1976 to the second half of 2000. The conclusion highlights both evidences of increasing returns on the Brazilian industry that faces, however, some structural constraints. Besides, the model also reveals Brazil's difficulties to catch up