Industrial Policy and Self Selection: Assessing the Impact of the Informatics Law in Brazil
12/06/2013
Technological-oriented sectors in developing countries have been a common target for industrial policy. In this paper, we assess the effect of government intervention through the so-called Informatics Law in affecting productivity in the Brazilian computer industry. In order to obtain the correct estimates of productivity, we develop a production function estimation method that in addition to simultaneity and sample selection biases it also takes into account the endogenous participation in the Brazilian government program. Our results are: i) firms that choose to receive the benefit are on average less efficient and have a bigger capital stock; ii) production function methods that do not take into account the self-selection in the Informatics Law indicate that more (or equally) efficient firms are the ones choosing to receive the benefits and iii) productivity rate of growth of firms that receive the benefit is smaller than productivity rate of growth of non-beneficiary firms. These results indicate that due to the selection of less efficient firms, in the long run the policy will have a negative effect in the Brazilian computer industry. Moreover, they also point out to the importance of considering the specificities of each industry in the estimation of the production function.
Daniel Veloso de Ávila Chaves.
Orientador: Leonardo Rezende.
Banca: Gustavo Gonzaga. Leonardo Rezende. Rafael Dix-Carneiro.