Long-term analysis of Kaldor's law applied to Brazil (1909-2020)

• We employ Kaldor's first and second laws to explore their applicability to the Brazilian economy over a very long-term period (1909-2020); • The methodologies entail a theoretical review of Kaldor's law and the empirical extant literature; a historical contextualization of Brazil's industrialization process; and an econometric exercise using the Markov regime-switching (MS) approach; • The research provides evidence of the positive relationship between industry growth and aggregate output growth, as well as between industrial productivity and employment growth in Brazil, particularly during periods of higher growth. Nicholas Kaldor asserts that the industry is a crucial factor in promoting economic growth, suggesting that the sector's increasing returns to scale significantly impact the overall productivity of the economy. This paper assesses the relevance of Kaldor's laws for the Brazilian economy, offering new insights into their applicability through a novel methodological approach. The study contributes to the literature by employing Markov Regime-Switching (MS) models to capture nonlinear dynamics in output, productivity, and employment growth in the manufacturing sector, over a very long-term period (1909-2020). By distinguishing between lower and higher growth regimes, the analysis demonstrates that Kaldor's laws remain valid in the Brazilian context. The findings underscore the industrial sector's critical role in promoting economic growth and enhancing productivity and employment, while revealing significant non-linearities in these relationships.