Wages, growth and cycles in the Brazilian economy

Brazilian economic development is marked by the reproduction of a very unequal income distribution profile. This has been justified by theories which prescribe the optimal allocation of resources and full employment of factors of production. Supposedly, a higher rate of economic growth is reached by this development model. This dissertation criticizes this view, using the argument that the Brazilian economy does not operate with optimal allocation of resources and with the full employment of factors. It is argued that lack of effective demand is an obstacle for the Brazilian economic growth. Since the propensity to consume from wages is higher than the one from profit, a redistribution of income towards wages can lead to higher economic growth. The originality of this dissertation is in the use of some new macroeconometric methods to criticize the former position and support the latter. More precisely, a macroeconometric model, with very few theoretical assumptions, is used to show that a redistribution of income towards wages can improve the macroeconomic performance of the Brazilian economy.U of I OnlyETDs are only available to UIUC Users without author permissio