Impacts of development policy production in the Brazilian economy: an analysis based on computable general equilibrium

Abstract

This paper analyses the impact of the reduction of two taxes (IPI and ICMS), as proposed by the Productive Development Policy (PDP), on trade flows of 13 sectors of the Brazilian economy, using a computable general equilibrium model (GTAPinGAMS). An alternative scenario was also adopted, considering a 50% uniform reduction in IPI. The results of both simulations show an increase of exports, decrease of imports for most sectors examined and a rise in welfare in Brazil. However, in the alternative scenario the gains are larger, with lower energetic dependence and trade deficit relative to the scenario based on the PDP measures.