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The Brazilian Economic Regimes and the Possibility of a Regime Switch

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  • Lilian N. Rolim
  • Carolina Troncoso Baltar

Abstract

The Brazilian experience of economic growth with social inclusion from 2004 to 2010 contrasts with the period between 2010 and 2015, in which economic growth was lower despite of the maintenance of the income transfer policies. Based on the Kaleckian theoretical model, we analyze how changes in the economic context altered the response of each aggregate demand component to shifts in income distribution, reducing the likelihood of wage-led regimes and possibly leading to a regime switch. While relevant to explaining specific economic contexts, the possibility of regime switches has been largely overlooked by the literature so far. The empirical estimations based on a SVAR model with an estimated structural break for the period between 2003 and 2015 confirm a reduction in the likelihood of a wage-led regime and suggest that wage-led economic regimes became profit-led after the break in 2010. Thus, the higher wage share had a positive impact on the Brazilian economy, but such effect weakened when the underlying economic conditions changed.

Suggested Citation

  • Lilian N. Rolim & Carolina Troncoso Baltar, 2025. "The Brazilian Economic Regimes and the Possibility of a Regime Switch," Review of Political Economy, Taylor & Francis Journals, vol. 37(1), pages 72-91, January.
    • Handle: RePEc:taf:revpoe:v:37:y:2025:i:1:p:72-91
    DOI: 10.1080/09538259.2022.2153588
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