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Fiscal responsibility legislation and fiscal adjustment : the case of Brazilian local governments

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  • de Mello, Luiz

Abstract

This paper discusses trends in fiscal adjustment in Brazil since the 1990s, with particular emphasis on the strengthening of institutions for fiscal policymaking, and its effect on local government finances and their ability to invest in infrastructure building and upgrading. Although fiscal adjustment, which is ongoing, has taken a toll on the government's ability to finance much-needed infrastructure investment, it is not the only culprit. A lack of budget flexibility, against a backdrop of increasing downward rigidities in current spending, also constrains the government's ability to invest. The paper argues that regulatory uncertainty in many sectors, particularly water and sanitation, in which the municipalities play a leading role, has discouraged private sector investment and that the financing of infrastructure building and upgrading goes beyond the municipal level of government. Higher-level jurisdictions are responsible for financing investment in energy and transport infrastructure, for example.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 3812.

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Date of creation: 01 Jan 2006
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Handle: RePEc:wbk:wbrwps:3812

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Keywords: Public Sector Economics&Finance; Municipal Financial Management; Urban Economics; Public&Municipal Finance; Public Sector Management and Reform;

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References

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  1. Giavazzi, Francesco & Jappelli, Tullio & Pagano, Marco, 2000. "Searching for non-linear effects of fiscal policy: Evidence from industrial and developing countries," European Economic Review, Elsevier, vol. 44(7), pages 1259-1289, June.
  2. Alberto Alesina & Roberto Perotti, 1996. "Fiscal Adjustments in OECD Countries," IMF Working Papers 96/70, International Monetary Fund.
  3. Robert F. Westcott & C. John McDermott, 1996. "An Empirical Analysis of Fiscal Adjustments," IMF Working Papers 96/59, International Monetary Fund.
  4. Carmen M. Reinhart & Kenneth S. Rogoff & Miguel A. Savastano, 2003. "Debt Intolerance," NBER Working Papers 9908, National Bureau of Economic Research, Inc.
    • Reinhart, Carmen & Rogoff, Kenneth & Savastano, Miguel, 2003. "Debt intolerance," MPRA Paper 13932, University Library of Munich, Germany.
  5. Bohn, Henning & Inman, Robert P., 1996. "Balanced-budget rules and public deficits: evidence from the U.S. states," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 45(1), pages 13-76, December.
  6. repec:rus:hseeco:123922 is not listed on IDEAS
  7. Alberto Alesina & Roberto Perotti, 1997. "Fiscal Adjustments in OECD Countries: Composition and Macroeconomic Effects," IMF Staff Papers, Palgrave Macmillan, vol. 44(2), pages 210-248, June.
  8. Devarajan, Shantayanan & Swaroop, Vinaya & Heng-fu, Zou, 1996. "The composition of public expenditure and economic growth," Journal of Monetary Economics, Elsevier, vol. 37(2-3), pages 313-344, April.
  9. Tao Zhang & Heng-fu Zou, 1996. "Fiscal decentralization, public spending, and economic growth in China," Policy Research Working Paper Series 1608, The World Bank.
  10. Alberto Alesina & Tamim Bayoumi, 1996. "The Costs and Benefits of Fiscal Rules: Evidence from U.S. States," NBER Working Papers 5614, National Bureau of Economic Research, Inc.
  11. Fabiana Rocha & Paulo Picchetti, 2003. "Fiscal adjustment in Brazil," Revista Brasileira de Economia, FGV/EPGE Escola Brasileira de Economia e Finan├žas, Getulio Vargas Foundation (Brazil), vol. 57(1), pages 239-252, January.
  12. Alberto Alesina & Roberto Perotti, 1996. "Fiscal Adjustments in OECD Countries: Composition and Macroeconomic Effects," NBER Working Papers 5730, National Bureau of Economic Research, Inc.
  13. Luiz De Mello, 2002. "Public finance, government spending and economic growth: the case of local governments in Brazil," Applied Economics, Taylor & Francis Journals, vol. 34(15), pages 1871-1883.
  14. Estache, Antonio & Sinha, Sarbajit, 1995. "Does decentralization increase spending on public infrastructure?," Policy Research Working Paper Series 1457, The World Bank.
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Citations

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Cited by:
  1. Violeta Vulovic, 2010. "The effect of sub-national borrowing control on fiscal sustainability: How to regulate?," Working Papers 2010/36, Institut d'Economia de Barcelona (IEB).
  2. Luiz de Mello, 2007. "Local Government Finances: The Link between Intergovernmental Transfers and Net Worth," OECD Economics Department Working Papers 581, OECD Publishing.

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