Easing the Effects of Austerity with Reforms: A regional CGE experiment on Brazilian labor productivity

Guilherme Cardoso, Thiago Simonato, Debora Freire and Edson Domingues

No 333186, Conference papers from Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project

Abstract: This article aims to project the variation of labor productivity in Brazil necessary to offset the contractionary impacts of the austerity agenda, considering regional heterogeneities. For this, a dynamic interregional general equilibrium model is used for 27 Brazilian federative units, allowing a bottom-up analysis. The main results show that the increase in labor productivity necessary to mitigate the contractionary effects of fiscal consolidation varies considerably between the Federation Units, relatively more onerous to the Northeast region. Macroeconomic results also follow the same pattern of regional heterogeneity. The increase in labor productivity in the states most affected by the contractionary impacts of austerity is hardly feasible due to the low prospect of household consumption, falling investment and high unemployment in a sectoral composition that has little benefit from the austerity and reforms agenda.

Keywords: Labor and Human Capital; Productivity Analysis (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:ags:pugtwp:333186

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