Is political stability overrated?

Brazil is the 8th largest economy in the world and a pivotal player on the global stage. Its successes and challenges offer valuable lessons in development and sustained growth, making its trajectory relevant for many emerging economies. For Natalia Doré (MACGROW), understanding Brazil’s economic performance over the past two centuries is not just a passion—it holds key insights to shaping the future of other economies navigating similar paths.

In a recent article co-authored with Aurora Teixeira (THEOMET), Natalia delves into the long-term forces behind Brazil’s economic growth. Using an Autoregressive Distributed Lag (ARDL) model, she examines both the short- and long-term relationships between economic growth and three key drivers: human capital, structural change, and institutional quality. A standout feature of her research is its extensive scope, covering nearly 200 years of Brazilian history.

Natalia finds that education and structural change have been crucial engines of Brazil’s growth, with structural change—particularly the shift of resources and activity from the primary sector to the industrial sector—having the most profound impact. Contrary to expectations, however, the study did not find sufficient evidence that political and juridical institutions, often thought critical for long-term growth, have played a significant role in Brazil’s performance. As Natalia puts it, “rebuilding Brazil and repositioning it on the global stage demands policies that foster the sophistication of its industrial sector, focusing on higher value-added activities.”

Building on this work, Natalia and Aurora turn their attention to Brazil’s convergence with other Latin American countries, Portugal, and the technological frontier, the U.S. Using a Markov regime-switching autoregressive model over the same time span, Natalia finds that Brazil has experienced real convergence with Latin American countries and Portugal, but not with the U.S. While investment in human capital has supported absolute growth, higher levels of education have not consistently driven economic catch-up with more affluent economies. In contrast, the quality of political institutions has played a crucial role in fostering Brazil’s real convergence with its peers, suggesting that institutional factors may be more decisive than education in narrowing the income gap between economies. Natalia emphasizes that “the contradictions in how factors like human capital and institutions respond to the convergence process are not surprising, as they are probably distorted by Brazil’s high levels of poverty and inequality.”

Currently, Natalia collaborates with other Brazilian economists in the project “Industriazliation and Deindustrialization in Brazil” and is deepening her research on the Macroeconomics of the Brazilian economy. She would gladly embrace partnerships for empirical studies on economic growth, structural change, and institutions.

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Natalia Izelli Doré is an Invited Assistant Professor at FEP, lecturing the courses of Macroeconomics and Economic Growth. She earned her PhD in Economics from FEP in 2022. Her doctoral thesis was recognized as one of the best by the Fórum de Integração Brasil-Europa (FIBE), and will be published as a book by Almedina (forthcoming). She may be reached at ndore@fep.up.pt .