The Political Economy of Fiscal Reform in Brazil: The Rationale for the Suboptimal Equilibrum
AbstractThis project examines fiscal reforms in Brazil since the 1990s, particularly in taxation, budgeting, and fiscal federalism. While recentralizing fiscal authority and massively expanding the extractive capacity of the state, policymakers chose not to revamp an inefficient tax system that has nonetheless proven capable of generating high levels of revenue. In budgeting, the economic crises of the mid-1990s prompted the government to rein in subnational fiscal imbalances but discouraged policymakers from introducing major changes in the tax system. As the executive derives utility from fiscal stability and inflation control because of electoral incentives and credibility gains in international markets, reform initiatives can generate political benefits for incumbent politicians. The paper finally argues that the Achilles’ heel of the sustainability of the Fiscal Responsibility Law is its enforcement technology: the Tribunais de Contas.
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Bibliographic InfoPaper provided by Inter-American Development Bank, Research Department in its series Research Department Publications with number 4655.
Date of creation: Feb 2010
Date of revision:
Fiscal responsibility laws; Fiscal federalism; Brazil; Political institutions;
Other versions of this item:
- Marcus André Melo & Carlos Pereira & Saulo Souza, 2010. "The Political Economy of Fiscal Reform in Brazil: The Rationale for the Suboptimal Equilibrum," IDB Publications 6784, Inter-American Development Bank.
- H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
- H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
- H83 - Public Economics - - Miscellaneous Issues - - - Public Administration
- H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-04-17 (All new papers)
- NEP-DEV-2010-04-17 (Development)
- NEP-PBE-2010-04-17 (Public Economics)
- NEP-POL-2010-04-17 (Positive Political Economics)
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.:
- Marcela Eslava, 2006.
"The Political Economy of Fiscal Policy: Survey,"
Research Department Publications
4487, Inter-American Development Bank, Research Department.
- Lee J. Alston & Bernardo Mueller, 2006.
"Pork for Policy: Executive and Legislative Exchange in Brazil,"
Journal of Law, Economics and Organization,
Oxford University Press, vol. 22(1), pages 87-114, April.
- Lee J. Alston & Bernardo Mueller, 2005. "Pork for Policy: Executive and Legislative Exchange in Brazil," NBER Working Papers 11273, National Bureau of Economic Research, Inc.
- Eduardo Lora, 2007. "The State of State Reform in Latin America," World Bank Publications, The World Bank, number 6642, October.
- Paulo Arvate & Braz Camargo & Carlos Pereira, 2010. "Fiscal Responsibility and the Supply of Public Goods," Working Papers 06-2010, Universidade de São Paulo, Faculdade de Economia, Administração e Contabilidade de Ribeirão Preto.
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