Effects of redistribution on growth in Brazil : a GVAR approach.

Abstract

We evaluate the impact of income redistribution on the Brazilian GDP using a GVAR model with 33 economies from 1980Q1 to 2018Q4. We detect a significant impact of redistribution on the GDP, with investment contributing to the diffusion of the shock. We find that Brazilian redistributive policies affect the GDP of trade partners, mainly Latin American economies. Hence, we argue that redistribution provokes spillover effects. We also examine if external redistributive policies affect Brazil’s GDP, and our estimates support this hypothesis. We created a new multiplier - the redistribution multiplier - and obtained values greater than two over time. Our research highlights the existence of spillover effects caused by redistributive policies and the importance of the international economy in the analysis. Redistribution policy effects are not enclosed to domestic borders.