Understanding the Brazilian demand regime: A Kaleckian approach

The empirical literature on Kaleckian growth and distribution models has almost exclusively investigated developed countries. These studies have used varied econometric techniques and estimation methods, but little attention was given to the developing countries. Onaran and Galanis (2013) provide an extensive review on this literature, and they complement it by estimating models for some developing countries. Nevertheless, due to lack of data, they were unable to estimate the model for Brazil. The contribution of this paper is to expand this empirical literature by adding the results that were found for Brazil. Hence, the Brazilian demand regime is analyzed in the period of 1956-2008, with the functional distribution of income data supplied by Adalmir Marquetti (which was developed in a paper by Marquetti et al., 2010). By applying the single-equation technique in the open economy Bhaduri/Marglin model, as outlined in Hein and Vogel (2008), the results of the estimation show that the demand regime in Brazil is wage-led, both domestically and as an open economy. Therefore, increases in the profit share tend to harm the demand. Finally, based on the estimated results and findings, policy implications are drawn.