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The motor vehicle industry in an emerging nation: the case of Brazil

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  • Lila J. Truett
  • Dale B. Truett

Abstract

As in other emerging nations, in Brazil, the motor vehicle industry is considered to be strategically important for economic development because of its backward and forward linkages and possibilities for export-led growth. This study analyses prospects for the industry by estimating an industry-level cost function that includes output of both vehicles and component parts with capital, labour and intermediate goods as inputs. The cost elasticity of output (an indicator of scale properties) and the elasticity relationships among inputs are explored. One unexpected outcome of the work that appears to be robust is that during early years of the study period, the industry had constant returns or even diseconomies of scale. However, during later years, when output was greater, there were economies of scale. This finding is likely the result of some combination of the entry of new firms, the development of new models or technological change. The study concludes that if firm output can be increased, economies of scale can be expected to strengthen the position of the Brazilian industry in the international marketplace.

Suggested Citation

  • Lila J. Truett & Dale B. Truett, 2016. "The motor vehicle industry in an emerging nation: the case of Brazil," Applied Economics, Taylor & Francis Journals, vol. 48(23), pages 2170-2182, May.
    • Handle: RePEc:taf:applec:v:48:y:2016:i:23:p:2170-2182
    DOI: 10.1080/00036846.2015.1114582
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    References listed on IDEAS

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    1. Fischer, Bernhard & Herken-Krauer, Juan-Carlos & Lücke, Matthias & Nunnenkamp, Peter, 1988. "Capital-intensive industries in newly industrializing countries: the case of the Brazilian automobile and steel industries," Open Access Publications from Kiel Institute for the World Economy 411, Kiel Institute for the World Economy (IfW Kiel).
    2. Dale W. Jorgenson, 2000. "Econometrics, Volume 1: Econometric Modeling of Producer Behavior," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262100827, April.
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