Measuring and explaining total factor productivity growth: Brazilian manufacturing in the seventies

Abstract

In the first part of the paper, we use translog indexes to measure the rate of total factor productivity growth (TFPG) in 80 different sectors of the Brazilian manufacturing industry in the 1970-90 period. In the second part, we conduct both correlation and regression analyses to identify variables associated with differences across sectors in the rate of productivity growth. TFPG averaged 2.6% p.a. in the seventies and accounted for one-fifth of output growth. Sectors that experienced rapid TFPG were the ones that expanded the share of exports in output, relied more heavily on imported machinery and material inputs, had a more skilled labor force, reduced their capital-output ratios, invested more, had production concentrated in few and young firms, and experienced fast growth of average establishment size. All in all, the results suggest that TFPG is determined mainly by economic structure. Export orientation, although having a positive and significant influence, does not seem to be the engine of growth that many have postulated. TFPG seems to be mainly associated with industrialization, and the key factors appear to be the capacity to exploit economies of scale, the reliance on industrially concentrated sectors, the ability to have a large of proportion of skilled workers in the labor force, and the capacity to keep the stock of capital technologically updated and on a rapidly expanding path.