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.
Alexandre Rands Barros
The Brazilian Northeast is a large poor region, which was the first to be colonized in Brazil. The region experienced some dynamism as a result of its early role as a centre of the agricultural export economy. However, historical and political circumstances resulted in a society in which there was a successive failure to build up the level of human capital level in the region. In particular, low access to political power of disadvantaged social groups prevented the implementation of an inclusive educational policy. This generated low per capita GDP and productivity growth, when compared to the national average. The prospects that some convergence with the national average will occur are only partial and restricted.
Peri da Silva
This chapter investigates the current as well as the potential degree of cooperation among the BRIC (Brazil, Russia, India, and China) economies. It shows that the increasing degree of economic interdependency among these economies is not a result of cooperative measures implemented by this group of nations. Moreover, the chapter suggests that the potential degree of cooperation among the BRICs is limited due to the presence of several economic asymmetries among these countries. The chapter concludes that the Brazilian diplomatic efforts to use the BRICs as a platform to pursue the national interests of Brazil has not yet generated concrete results.
Luiz Ricardo Cavalcante
This chapter discusses the role played by the Brazilian Development Bank (BNDES) based upon a survey of its costs and benefits reported in the literature. It provides some theoretical background for the creation and the existence of development banks, using this background to support a brief discussion about the long-term context that marked the bank’s evolution as well as the contemporary issues concerning its role in the Brazilian economy. The author argues that a national development bank such as the BNDES contributes to increasing capital formation, as it provides credit at more favorable conditions to selected projects. However, the author also argues that the presence of the BNDES loans forces the Central Bank to raise interest rates to a level that otherwise would be lower.
Joseph L. Love
This chapter examines the evolution of the structuralist school of economic thought in the Brazilian context. The intellectual roots of structuralism are analyzed, as is the influence this set of ideas has had on economic policy formulation in Brazil. Prominent structuralists such as Celso Furtado and Raul Prebisch influenced the governments of Getúlio Vargas and Juscelino Kubitschek, while Furtado himself played a key role in establishing the national development bank (BNDES) and the Northeast development agency, SUDENE. Furtado “historicized” CEPAL structuralism and showed how losses in the coffee sector were spread across the whole economy in the 1930s. He furthermore developed a model of internal colonialism and arguably was the first dependency theorist. The crisis of structuralism in the mid-1960s ultimately resulted in neostructuralism in 1990, a reformed version of the doctrine that emphasized the export market, technological change, and continual “learning by doing.”
Donald V. Coes
This chapter reviews some of the major trends in Brazilian trade and international economic policy, including its reaction to international commodity market and capital market shocks in recent decades and the politically driven emphasis on preferential trade. It also examines the question of how “open” the Brazilian economy is, even after some moves toward greater linkages to world markets. The chapter then considers some of the major anti-globalization trends in Brazil’s principal economic partners, and attempts to identify some of their causes. It argues that Brazil’s links to other economies through capital and labor markets are at least as important as are its commodity trade links. Trends in these markets may help explain some of the anti-globalization attitudes it may face in the future. With the half-century consensus in support of internationally open trade, capital, and labor markets seemingly under siege, the way ahead for Brazil is far from clear.
Income inequality in Brazil, already high, increased after the military coup of 1964 and remained very high even after democratization in the 1980s. It decreased substantially in the period 2001–2014, after inflation was controlled. The Gini index of the per capita household income dropped from 0.594 in 2001 to 0.513 in 2014. The determinants of this decline in inequality are analyzed considering the components of that income and how each one affected changes in inequality, showing the impact of changes in the remuneration of private sector employees and in pensions paid by the government, as well as federal transfer programs. Changes in education lie behind the first of these effects, and the increase of the minimum wage reinforced all three. The economic crises after 2014 interrupted the process of decline, and among economically active persons, inequality even increased from 2014 to 2015. Measures to further reduce inequality are suggested.
David Lawther Johnson
For regions seeking to advance economic competitiveness, building appropriate clusters of concentrated economic activity remains an effective strategy, even as traditional “smokestack-chasing” approaches to economic development grow increasingly problematic. Still, cluster approaches face their own challenges in addressing the costs and risks of innovation, producing significant numbers of new jobs in the short term, carrying out credible claim marketing efforts in a data-driven global marketplace, and demonstrating sufficient breadth of benefit from their necessarily focused concentrations of investment and talent. For the past 15 years, Central Indiana has pursued a series of cluster initiatives through an unusual organizational strategy and structure that provides an instructive view of the opportunities and challenges in 21st-century cluster development.
Martin Binks and Simon Mosey
In the UK, business schools are being exhorted by government to engage with local organizations to enhance their competitiveness. However, a historical legacy of providing courses for international students and a research focus upon multinational firms has constrained the capability of most business schools to contribute in this way. This chapter highlights global examples of business schools recognizing the opportunity to develop locally useful knowledge and enhance the capabilities of their students to deploy that knowledge. Business schools are seen to significantly reposition their offer by developing the leadership skills of local organizations and enhancing the entrepreneurial and problem-solving skills of their students for local deployment. The chapter concludes that a sustained emphasis upon faculty and student engagement with local organizations can allow business schools to overcome legacy constraints and thereby contribute more fully to local economic competitiveness for mutual benefit.
The chapter deals with characteristics of the Brazilian colonial period (from 1500 to independence from Portugal in 1822) that have exercised a significant influence on later developments. Three aspects of the institutional framework of Portuguese colonization are emphasized: the relations between the colonial government and the private sector; the pattern of access to land by colonists; and the widespread use of slave labor. It is argued that colonial policies were detrimental to private initiative, hampering access to productivity gains from industrialization in the eighteenth century. Distribution of land, in large tracts, to privileged individuals was instrumental in establishing a pattern of inequality in wealth, power, and political influence; the landless majority helped to bring about an elastic supply of labor in later periods. Slavery, which dominated the labor market from the sixteenth century to the nineteenth, was an element of the inequality in income distribution that persists to the present.
The literature on the university’s role in regional economic development and technology commercialization has almost entirely focused on commercialization as managed through technology-licensing offices. Drawing upon case studies from a forthcoming book, it is shown that technology transfer through regional engagement by University of California campuses is far more complex and bidirectional than the current academic literature indicates. We also show that there are distinct disciplinary differences in the technology transfer process. For this reason, we suggest that technology transfer offices have little to do with most of the knowledge transferred by universities and, in certain cases, may even frustrate the transfer process. The chapter suggests better understanding of the true nature of technology transfer would allow both policymakers and university administrators to develop more effective policies.