Capital Accumulation, External Restriction, Technology Gap and Structural Change: Theory and the Brazilian Experience

Brazilian economy was the most dynamic in terms of growth among developed and developing economies from post-War until 1980, when a severe external constraint interrupted this trend. We propose in this paper a model, based on Kaldor, where capital accumulation, technological gap and long run external constraint are connected. Our hypothesis is that capital accumulation, under certain circumstances, can overcome external constraint if the accumulation effort promotes structural change increasing the importance of sectors more technological-intensive. It is expected that the structural change in this direction will contribute to an increase in the income-elasticity of exports and to a decrease in income-elasticity of imports, resulting in the increase in the growth rate of real product compatible with the balance of payments equilibrium in the long period. The last part of the paper shows that the high investment rate observed in the Brazilian economy from the post-War until the end of the 1970s resulted in the deepening of the import substitution process, what, in our interpretation, contributed to partially increase the long run growth rate of the Brazilian economy compatible with the balance of payment equilibrium.