This paper investigates the effects of institutional reforms in Brazil. It first provides a comparative assessment of the level of institutional development of Brazil with other Latin American countries such as Chile and Argentina. It considers institutional indicators on "doing private business", including those related to the start up costs, employment rigidity, the expropriation of private investment and bankruptcy law. In general, Brazil presents a lower level of institutional development than Chile and Argentina. As an example, the number of procedures to start a business in Brazil is roughly twice as large as in Chile. We evaluate the importance of institutional differences on economic development using data for a wide cross-section of countries. As in Acemoglu, Johnson, and Robinson [Acemoglu, D., Johnson, S., & Robinson, J. A. (2001). The colonial origins of comparative development: An empirical investigation. American Economic Review, 91(5), 1369-1398], we use the European mortality rate in the colonial period and the "legal origin" to exploit exogenous variation in the level of institutions. We identify issues where institutional reforms are likely to significantly affect per capita gross domestic product (GDP), the ratio of private credit to GDP and the ratio of investment to GDP. We then construct three indices developed in Tavares [Tavares, J. (2004). Institutions and economic growth in Portugal: a quantitative exploration. Portuguese Economic Journal, 3, 49-79] that measure the potential of institutional reforms by using institutional distance, in our case between Brazil and Chile. The most promising reforms for the Brazilian economy, as far as their effects on output per capita, are, in decreasing order: (i) reducing the number of procedures to open a business; (ii) decreasing the average time involved in insolvency proceedings; (iii) increasing labor market flexibility; and (iv) increase effective creditor's protection.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
For technical questions regarding this item, or to correct its listing, contact: (Heidi Boesdal).
Related research
Keywords:
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)