Impacts of Trade liberalization on Countries' Sectoral Structure of Production andTrade: A Structural Decomposition Analysis

This study extends structural decomposition analysis (SDA) to consider the substitution between domestic and imported inputs. The approach provides a detailed investigation of the consequences on economic growth following changes in countries’ supply chains. We apply the method to data from Brazil and other countries. The results suggest that the substitution of imported for national inputs is a key factor in SDA, assuming that the impact of technological change is underestimated if this substitution is not taken into account. The findings also show that the substitution of imported inputs is essential to understanding the Brazilian growth path in the 2000s. The positive impact of export growth on total output was offset by the increase in imported inputs, especially in highly technological sectors. The results in Brazil stand in contrast with those in Korea, China, and Germany, where high-tech sectors benefited the most from the substitution.Coordenac¸ ão de Aperfeic¸ oamento de Pessoalde Nível Superior (CAPES) and Cambridge Overseas Trust (COT) financed G Magacho for his Ph.D. studies during the period that this paper was develope