Suchergebnisse

This project examines fiscal reforms in Brazil since the 90s, focusing on the varying reform outcomes in the area of taxation, budgeting, and fiscal federalism. While there has been an extensive reorganization of fiscal federalism in the country since the mid- 1990s, much less change can be observed in the area of taxation. The federal government has managed to recentralize fiscal authority in the country, curbing the autonomy of the states by resorting to numerical rules. By contrast, while expanding massively the extractive capacity of the Brazilian state, policy-makers choose not to revamp the tax system, and to keep an inefficient system that has been capable to generate high levels of revenue. In the area of budgeting, several changes were implemented and the federal executive has been able to strengthen its control over the budget process. The economic crises in the mid-1990s created contrasting incentives to reform. While the crises episodes prompted the government to rein in subnational fiscal imbalances and ultimately to enact the Fiscal Responsibility Law, they discouraged policy-makers from introducing major changes in the tax system. This status quo bias is associated with differences in risk aversion across the issue areas but also with the incentives in the country's policy-making process. We argue that the executive derives utility from fiscal stability and inflation control because of electoral incentives and of credibility gains in international markets. This endogenous perspective allows us to understand fiscal and tax reform initiatives as generating political benefits for incumbent politicians. However, fiscal stability was attained at the cost of systemic inefficiency associated with highly regressive and distortionary taxes.

This paper explores the link between Brazil's political institutions and its disappointing productivity and growth in recent decades. Although political institutions provide the president with incentives and the instruments to pursue monetary stability and fiscal discipline they simultaneously raise the costs of achieving those very objectives. The insulation of certain expenditures from presidential discretion necessitates the use of other policy options, such as high taxation levels and cuts in unprotected expenditures, which put a drag on productivity and growth. In a context of robust checks and balances and interest group fragmentation, a state overburdened by constitutional entitlements has resorted to massive increases in taxation. The resulting environment possesses both essential elements for sustainable economic growth and distortions that conspire against its realization. While some improvements in productivity and growth have occurred in the past decade, the pace has been slow and incremental.

States usually differ markedly in terms of public goods provision and corruption. Why are some state governments able to provide adequate health and education services, but others tend to specialize in the provision of private goods such as public sector jobs and targeted transfers to specific clienteles? Why are some states better capable of promoting economic development while others allow stagnation? Why is corruption more prevalent in some states than in others? Why are some states more efficient in the provision of publicly-provided goods and service than others? Exploring the idea that political institutions are important determinants of the policies implemented in states, we propose a model of the policymaking process and then test its implications with state-level data for the period 1999 to 2006 in Brazil. The focus of the empirical tests is on the impact of political competition and checks & balances on the characteristics of the policies that emerge in the states. Political competition has important virtuous effects on the choices made by governors and other political actors by determining how long they expect to be in power, what they can do while in power, and at what costs. We develop an index of checks & balances for Brazilian states and test the interaction of checks & balances with political competition. We found that the impact of political competition varies with the degree of checks & balances.