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

  • de Mello, Luiz

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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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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  1. 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.
  2. 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.
  3. 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.
  4. Tao Zhang & Heng-fu Zou, 1996. "Fiscal decentralization, public spending, and economic growth in China," Policy Research Working Paper Series 1608, The World Bank.
  5. Alberto Alesina & Roberto Perotti, 1996. "Fiscal Adjustments in OECD Countries; Composition and Macroeconomic Effects," IMF Working Papers 96/70, International Monetary Fund.
  6. Rocha, Fabiana & Picchetti, Paulo, 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), January.
  7. 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.
  8. Shantayanan Devarajan & Vinaya Swaroop & Heng-fu Zou, 1996. "The composition of public expenditure and economic growth," CEMA Working Papers 77, China Economics and Management Academy, Central University of Finance and Economics.
  9. C. John McDermott & Robert F. Wescott, 1996. "An Empirical Analysis of Fiscal Adjustments," IMF Staff Papers, Palgrave Macmillan, vol. 43(4), pages 725-753, December.
  10. repec:rus:hseeco:123922 is not listed on IDEAS
  11. Henning Bohn & Robert P. Inman, 1996. "Balanced Budget Rules and Public Deficits: Evidence from the U.S. States," NBER Working Papers 5533, National Bureau of Economic Research, Inc.
  12. 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.
  13. 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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