Samuel A. Morley

Limited Search and the Technology Choices of Multinational Firms in Brazil

I. Introduction 263.—II. Limited search and technology transfer, 265.—III. Empirical results, 271.—IV. Policy implications, 286.

Inflation and Stagnation in Brazil

The perplexing thing about the Brazilian economic situation in the 1960s was the simultaneous presence of inflation and relative stagnation. Over the four years 1963-66, the annual industrial growth rate fell from the 9.8 percent of the previous decade to 3 percent. Yet prices more than quadrupled during the period despite a variety of antiinflationary measures. The economy had the worst of both worlds, inflation without growth. While such a record would not be surprising over a short interval, its existence for half a decade in the economy which was once regarded as the most dynamic in Latin America generates concern and requires explanation. The problem that I want to consider is the process of inflationary stagnation as it took place in Brazil. There are a number of different reasons for such a situation, most involving a dynamic adjustment process presumed to be temporary: (1) Effective demand can be rising slower than costs during a stabilization program. (2) There may be a sudden change of demand relative to supply. It is theoretically possible for income redistribution or increased government spending to so change the mix of goods required that certain sectors are faced with excess demand and raise prices, while at the same time others have reduced sales. Prices may rise on average and output may fall, depending on price elasticities and the importance of each of the industries in the output and price indices. (3) Inflationary stagnation can also come from a fall in effective capacity. Credit rationing or political uncertainty could reduce new investment and working capital and shift supply curves to the left. In this situation, rising demand would lead to inflation but not growth. (4) A restrictive inflation program could be applied intermittently. Since output typically

Estimating Income Mobility from Census Data

Abstract In this article we propose a methodology for estimating income- mobility matrices from census data. The methodology is applied to Brazil, using 1970 and 1980 census data. Goodness-of-fit tests show that the method yields estimates of income mobility that are both accurate and unbiased. For Brazil the results indicate that workers at all income levels benefited from growth between 1970 and 1980 but that Brazils growth was nevertheless unequalizing: workers who started with higher incomes in 1970 benefited more from growth than workers who started with lower incomes. The estimated income-mobility matrices were then used to calculate life-cycle incomes. They indicate that upward mobility made life-cycle income distributions more equal than the distribution of starting incomes for workers of both sexes.

Deficits, debt and destabilization: The perversity of high interest rates

Abstract In this paper we explore the dimensions of the dynamic instability inherent in the combination of a large public debt and the persistence of high real interest rates, a situation characteristic of many Latin American countries at the present time. We show how it may be impossible simultaneously to attain growth and inflation objectives following orthodox stabilization strategies. Dynamic instability constrains increasingly the feasible policy space with continuing high real interest rates.

Evidence on the internal labor market during a process of rapid economic growth

Abstract We examine the nature and extent of labor market segmentation in Brazil through a survey of 82 modern sector firms in Sao Paulo. Hiring, training and promotion patterns are found to differ significantly between occupations and a key to understanding these patterns is the nature of skill acquisition, particularly ‘learning on the job’. Furthermore the presence of skill- specificity and internal labor markets for supervisory personnel provide a possible explanation for why relative wages have widened during Brazils period of rapid economic growth.

Labor intensity and employment creation in a constrained economy

Abstract When considered in a general equilibrium context, this paper shows that sectoral labor intensity is a poor proxy for the employment effects of sectoral demand or export expansion. We develop an open economy input-output model with endogenous consumption and capital formation to measure the employment effects of these two sorts of exogenous increases in demand. We show that in an open economy, the employment effect of sectoral government spending programs is always less than the number of jobs created by the program and could well be negative while the opposite is true for sectoral export expansion.