Impact of the Innovate-Auto tariff policy on the welfare of the economy

The aim of this article is to conduct an analysis of the Innovate-Auto program on the welfare of the Brazilian economy. From the VAR/VEC (vector auto regressive and vector error correction) models, long-term elasticities are estimated, evaluating the welfare incurred by the tariff imposition. It appears that there are economies of scale in the Brazilian automotive industry, so it is reported that the net effect of tariffs is relatively small, while the effects of redistribution of tariffs are considerable. In addition, it appears that the argument that tariffs protect domestic employment is not plausible. Finally, the regime reduced imports, but did not prove effective in leveraging exports. However, the need to reassess automotive programs in Brazil from R&D and technological innovation is pointed out.