ABSTRACT
Brazil is relatively well equipped with labour, whereas capital represents the scarce production factor, especially in the form of human capital. Hence, her comparative advantages in the international division of labour are concentrated on labour-intensive products. The increase in the share of capital-intensive products in Brazilian exports to developed countries can to some extent be attributed to the product-cycle hypothesis, according to which developing countries enjoy a comparative advantage in producing standardized goods, which are capital-intensive in terms of physical capital, but do not require considerable inputs of highly skilled labour. Firm-specific data point to policy discriminations at the firm level as well, especially with respect to firm size. Export subsidy rates granted by the Brazilian government increased with the size of the exporting firms. The exchange-rate policy must be flexible enough to avoid overvaluation; the unequal dispersion of incentive schemes among industries should be reduced.
