Tracy M. Gordon
The United States is considered a highly decentralized country. More recently, American federalism has been in a state of flux. At the same time, decentralization has been on the rise internationally. Taken together, experiences in the United States and internationally point to some inherent tensions in federalism. This article argues that such concerns have prevented the adoption of an enduring state fiscal equalization program in the United States. Nevertheless, recent federal stimulus legislation may point to some ways forward. The article reviews the theory of fiscal federalism and its implications for intergovernmental grant programs. It also examines the evolution of intergovernmental transfers in the U.S. federalist system. Following this, the article evaluates design issues for any state fiscal equalization program. Finally, it suggests that there may be a role for ensuring states and localities against financial disaster and suggests future directions.
M. Freire, S. Lall, and D. Leipziger
This chapter examines Africa’s urbanization and the challenges and opportunities it presents, with emphasis on what it will take to make African cities efficient, sustainable, and inclusive. Using economic geography as an organizing framework, it proposes policies that not only support agglomeration benefits but also manage congestion costs. The discussion begins by sketching key elements of African urbanization (heterogeneity, income levels, capital investment, etc.) followed by a review of recent literature on urban growth models and how they apply to Africa’s urbanization process. It then considers what should be done to encourage efficient and inclusive African cities, while taking into account the diversity of countries as well as the continent’s geographical and social division.
Carlos José Caetano Bacha
This chapter analyzes the evolution of agriculture in Brazil from the early sixteenth century until the second decade of the twenty-first century. It focuses on seven domestic and external conditioning factors that have stimulated and supported the sector’s expansion in Brazil. These factors and the way that they have impacted agricultural expansion and will continue to drive Brazil’s agricultural sector for at least the next two decades. Given the availability of fallow arable land, at current productivity levels, this idle area could be used to double crop production. The transference of road operation to the regulated private sector will lead to improved road surfaces and maintenance, thereby facilitating the transportation of agricultural production to exporting ports. The reduction of agricultural sector subsidies and the increased forest conservation efforts by the European Union should improve Brazilian agriculture’s competitive position in many foreign markets currently served by EU farmers. The increasing share of Brazil’s agricultural production sold in world markets makes the country’s agricultural sector more vulnerable than ever to uncontrollable outside forces. World economic growth, especially that of China and the European countries, is a necessity if the Brazilian agricultural sector is to continue expanding and improving efficiencies. Most Brazilian agricultural inputs continue to be produced by foreign companies or their Brazilian subsidiaries. These overseas entities are a very strong force in the domestic inputs market and represent another uncontrollable factor that affects local farmers’ earnings and Brazil’s balance of trade.
This chapter examines the role that public policy initiatives—specifically anti-poverty transfers—have played in the reduction of poverty and inequality in Brazil. A number of anti-poverty initiatives are considered in turn, and not just the widely known Bolsa Familia conditional cash transfer program. The analysis establishes that such transfers—including conditional cash transfers—have proved surprisingly effective, even helping to tackle long-standing income inequality. It is recognized that explicit anti-poverty initiatives were not the only drivers of the reduced incidence of poverty and inequality: factors such as growth and improved access to labor markets also played a role. However, progress is now threatened by the recent economic and political crisis.
Eduardo Pontual Ribeiro, Camila Pires-Alves, and Luis Carlos D. Prado
This chapter presents and analyzes Brazil’s competition policy on merger control and the abuse of market power. Its role as an important Brazilian public policy derives from a combination of three factors: historical evolution, legal framework, and institution building. The chapter provides an analysis of the evolution of its main agency, the Administrative Council for Economic Defense (Conselho Administrativo de Defesa Econômica, CADE), while focusing on the control of cartels and mergers. The chapter further discusses institution building over the years surrounding the practice of competition law. Current practice and challenges in this are also discussed in the chapter.
Edwin S. Mills
This chapter examines the functions of and prospects for large metropolitan areas (MAs) in the United States. It argues that the high cost of transporting people and goods is a necessary, but not sufficient condition for MAs. Economies of scale and scope and the technical ability to substitute structures for land provide cost advantages to firms located in MAs. The factors that limit the sizes of the largest MAs include the size and geography of the country, the limited demand for commodities and services produced in the MA, congestion and pollution, and social issues such as crime, homelessness, poverty, illegitimacy, racial tensions, and other forms of alienation that increase with MA size. Because of these limiting factors, the largest US MAs are expected to grow at slower rates than the US population in coming decades, whereas suburbs will continue to experience rapid growth.
Assessing State-Level Science and Technology Policies: North Carolina’s Experience with SBIR State Matching Grants
John Hardin, Lukas Brun, and Lauren Lanahan
State government R&D expenditures play a critical role in supporting innovation in the United States. This chapter discusses the growing role of US state governments in supporting R&D activity, paying particular attention to a small business innovation program in North Carolina designed to complement the federal Small Business Innovation Research (SBIR) program. The chapter first provides an overview of the literature on state science and technology policies that encourage innovation, competitiveness, and economic development at the state level. It then reviews complementary federal and state government policies aiming to improve the success rate of the SBIR program, with particular attention to the One North Carolina Small Business Program. It discusses the objectives of the state policy and provides results of a program assessment, which indicate that the state matching program meets the objectives of the policy and provides positive spillover effects to North Carolina’s economy.
Geraldo B. Martha Jr. and Eliseu Alves
Brazilian agriculture reinvented itself by targeting a science-based approach. Embrapa, the research arm of the Brazilian Ministry of Agriculture, is recognized as key in this process. A set of characteristics—public corporation model; scale of operation at national level; spatial decentralization; specialized research units; strong focus in human capital; a vision of an agriculture based on science and technology—explains Embrapa’s strength and achievements. Looking ahead, agricultural production needs to increase at least at the same pace of demand. Otherwise, prices will increase, and the poor will suffer the greatest impact. One of the greatest barriers to ensure modern technology will be more broadly and effectively adopted is market imperfection, which alters relative prices and the returns to investment in technologies. Reducing market imperfections is a necessary condition for expanding production in a more inclusive way, and to increase the effectiveness of policies targeting technology adoption by farmers.
This chapter examines the development of Brazil’s inward-oriented industrialization strategy, commonly termed “import-substitution industrialization” (ISI). Originating in the 1930s under the corporatist administration of Getúlio Vargas, by the 1960s the strategy had succeeded in transforming the structure of the Brazilian economy, turning it into a major industrial powerhouse. Successful though the strategy initially was in promoting growth and structural change, it nevertheless suffered from inherent flaws, notably its heavy reliance on imported inputs and a failure to produce and export efficient industrial sector. This chapter considers the achievements and failings of ISI in some detail and also discusses the results of attempts to reintroduce the strategy on a limited scale in the first decade of the 2000s.
Brazil’s Macroeconomic Policy Institutions, Quasi-Stagnation, and the Interest Rate–Exchange Rate Trap
Luiz Carlos Bresser-Perreira
This chapter examines the evolution of macroeconomic policy and institutions over the long term and the ways in which they have influenced the growth path of the Brazilian economy. It establishes that a critical influence on the disappointing growth performance realized was a failure to neutralize the effects of exchange rate induced Dutch Disease. In addition to this, Brazil’s economic dynamism has been inhibited by the pursuit of a growth with current account deficits (“foreign savings”) policy; an exchange rate anchor policy to control inflation; and a high level of interest rates. Collectively, these factors have reduced the productivity and competitiveness of Brazil’s manufacturing industry. In addition, the interest-rate level has remained very high since the Real Plan and, from the late 1970s the investment capacity of the Brazilian state drastically decreased.