Nonlinearity of the Relationship between Human Capital and Exportation in Brazil

Abstract

For Brazil to realize the economic benefits of competitive advantage, it is critically important that the country's policy makers have an awareness of the determinants of Brazilian exports. Our study aims to evaluate the role of human capital measured by the average years of workforce formal education, in the value of exports from each Brazilian state from 1995 through 2006, highlighting differences among the states and/or regions. Based on the Dixit and Woodland (1982) model, our empirical analysis is implemented by running a regression of data organized into a panel that takes into account the fixed effects (i.e., the amenities) found in each of the 27 Brazilian states (including the Federal District). Our findings are consistent with the selected theoretical model and indicate that human capital in Brazil has a nonlinear effect on exportation with an inflection point of 6.7 years of formal education.