INDUSTRIAL POLICY AFTER THE LIBERALIZING REFORMS: AN EMPIRICAL ASSESSMENT OF BRAZIL

ANDRÉ NASSIF; Carmem Feijo; Eliane de Araújo; Paulo Morceiro

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Trabalho

Título do Trabalho

INDUSTRIAL POLICY AFTER THE LIBERALIZING REFORMS: AN EMPIRICAL ASSESSMENT OF BRAZIL

Autores

ANDRÉ NASSIF
Carmem Feijo
Eliane de Araújo
Paulo Morceiro

Modalidade

Artigo (para Associados AKB) / Full papers (AKB members)

Área temática

Área 4. Microeconomia, Economia Industrial e Estrutura Produtiva

Data de Publicação

26/10/2026

País da Publicação

Brasil

Idioma da Publicação

pt-BR

Página do Trabalho

https://www.even3.com.br/anais/akb2026-697763/1560347-industrial-policy-after-the-liberalizing-reforms--an-empirical-assessment-of-brazil

ISBN

978-65-272-2867-7

Palavras-Chave

Industrial policy; Industrial and technological transformation; Economic development; Brazil.

Resumo

Although the term “industrial policy” encompasses multiple definitions, in this paper it is understood as the use of a broad set of government intervention instruments – both horizontal and vertical – aimed at fostering activities, segments, and sectors with high potential to generate and diffuse technological progress, as well as to accelerate capital accumulation. This includes not only manufacturing industries but also strategic services. The main objective is to increase the share of technologically sophisticated goods and services in both the domestic productive structure and the export basket, thereby contributing to economic development and to the convergence of per capita income and welfare levels in developing countries toward those observed in advanced economies. Despite the extensive literature on the theoretical foundations, instruments, and conditions for the success of industrial policies, empirical evaluations based on econometric methods that assess their actual impacts remain scarce. This paper seeks to fill this gap by analyzing, using statistical data and econometric models, the effects of Brazilian industrial policies in the period following the liberalizing reforms initiated in the 1990s. To the best of our knowledge, in terms of impacts measured by econometric models, our methodology – described below – offers an original approach to analyzing the Brazilian case and other experiences with industrial policy. Between 1950 and 1980, the Brazilian state implemented various industrial policy instruments aimed at promoting industrial change and long-term growth. Despite issues such as allocative inefficiencies and a high degree of dependence on foreign technology, this period was marked by strong economic growth (an average annual rate of 7.5%), significant increases in labor productivity (4.5% per year), and profound structural transformations, including an expansion in the share of manufacturing in GDP (from 20.2% to 28.8%) and in exports (from 10% to 45%). This model experienced a major inflection in the 1980s due to the external debt crisis and accelerating inflation. In the 1990s, with the adoption of liberalizing reforms aligned with the so-called Washington Consensus – such as trade liberalization, privatization, and external financial opening – industrial policies were progressively abandoned as a central pillar of the development strategy. After monetary stabilization in 1994, this orientation was consolidated, and industrial policy programs only regained prominence during the first term of President Lula da Silva (2003–2006). However, descriptive evidence suggests that, despite a more sophisticated institutional design – combining horizontal, vertical, and transversal instruments with a focus on innovation – the policies implemented since 2004 have not achieved the expected results. Between 2000 and 2023, the process of deindustrialization in the Brazilian economy intensified, while the share of agricultural products in total exports rose from 14.3% to 48.6%, marking a clear reprimarization of the export sector. The central hypothesis of this paper is that, despite efforts to improve institutional coordination, the limited effectiveness of these policies largely stems from the lack of adequate support from the macroeconomic regime in place since 1999. It is argued that the so-called macroeconomic “tripod” – based on inflation targeting, primary fiscal surplus targets, and a floating exchange rate regime in a highly open economy – has contributed to persistently low investment rates, high real interest rates, and significant exchange rate volatility. This volatility is often associated with a long-term tendency toward currency overvaluation, punctuated by episodes of sharp depreciation in response to domestic or external shocks. The empirical strategy is based on a dynamic panel data model, estimated for the post-2000 period up to the most recent year with available data, with sectoral disaggregation according to the Pavitt taxonomy (resource-based, labor-intensive, scale-intensive, specialized suppliers, and science-based). The dependent variable is the share of value added of each sectoral group in total manufacturing value added, allowing for the identification of structural changes over time. Given the dynamic nature of the model and the possibility of endogeneity – especially between industrial policies and sectoral performance – the estimation will be conducted using dynamic panel GMM methods (such as Difference-GMM or System-GMM). These estimators address omitted variable bias, simultaneity, and unobserved fixed effects by using appropriate lags of the variables as internal instruments. The explanatory variables are organized into three blocks. The first includes sector-level industrial policy instruments, such as BNDES disbursements for physical investment, financing for innovation (BNDES and/or Finep), subsidies, and import tariffs. These variables are expected to have a positive effect on the share of more technologically intensive sectors (especially specialized suppliers and science-based), reflecting the objectives of successful industrial policies. The second block comprises sectoral performance variables, such as investment rates and R&D expenditures, capturing sectors’ accumulation capacity and innovative effort. Finally, the third block incorporates macroeconomic variables that influence structural dynamics, such as real interest rates, real effective exchange rates, and public investment as a share of GDP. The analysis tests whether macroeconomic conditions – particularly high real interest rates, exchange rate overvaluation, and a bias in structural change toward less technology-intensive sectors – have constrained industrial and technological transformation. If this hypothesis is confirmed, we show that Brazilian industrial policy instruments are partially, if not completely, annulled by the macroeconomic regime prevailing in Brazil since the early 2000s. The paper is organized as follows. Section 1 discusses the theoretical foundations, instruments, and main determinants of success or failure in industrial policy. Section 2 examines the design and implementation of industrial policies adopted since 2004, including a brief analysis of the period dominated by liberalizing reforms (1990–2002). Section 3 addresses issues of institutional coordination, with emphasis on the interaction between industrial policies and the macroeconomic regime. Finally, Section 4 presents the empirical results, divided into two parts: the first provides descriptive statistics on productive structure, foreign trade, and productivity; the second presents the results of the econometric model used to test the paper’s central hypothesis.

Título do Evento: XIX Encontro da Associação Keynesiana Brasileira
Cidade do Evento: São Cristóvão
Título dos Anais do Evento: Anais do XIX Encontro da Associação Keynesiana Brasileira
Nome da Editora: Even3
Meio de Divulgação: Meio Digital

Como citar

NASSIF, ANDRÉ et al.. INDUSTRIAL POLICY AFTER THE LIBERALIZING REFORMS: AN EMPIRICAL ASSESSMENT OF BRAZIL.. In: Anais do XIX Encontro da Associação Keynesiana Brasileira. Anais...Aracaju(SE) Hotel Del Mar, 2026. Disponível em: https//www.even3.com.br/anais/akb2026-697763/1560347-INDUSTRIAL-POLICY-AFTER-THE-LIBERALIZING-REFORMS--AN-EMPIRICAL-ASSESSMENT-OF-BRAZIL. Acesso em: 01/11/2026