Government action under constraints : fiscal development, fiscal policy and public goods provision during the Great Depression and in 19th and early 20th century Brazil

• Main Author: Papadia, Andrea
• Published: London School of Economics and Political Science (University of London) 2017
• Subjects: HC Economic History and Conditions
• Online Access: https://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.740089

This dissertation is composed by three papers whose unifying themes are the origin and impact of fiscal institutions. The main contribution of this paper is twofold. First, it highlights the usefulness of the concept of fiscal capacity for the macroeconomics and international finance literatures by demonstrating its impact on sovereign default and fiscal dynamics during the Great Depression. Limits to the ability to tax have clear implications for macro-financial research, but are neglected by much of the literature. Second, my work contributes to the fiscal and state capacity literature by focusing on municipal level fiscal institutions in Brazil. Although research in this field is burgeoning, our understanding of the origin and impact of fiscal institutions in many parts of the world, including Latin America, is still very limited, particularly at the sub-national level. In terms of structure, the dissertation is a backwards journey from the impact of fiscal institutions to their origin. The first paper studies one of the ultimate outcomes of fiscal dynamics – sovereign default – by analyzing the debt crisis of the 1930s. The second paper takes the collapse in public revenues during the Great Depression as a starting point and demonstrates that fiscal institutions were a fundamental factor in the dynamics of fiscal aggregates. By shifting the focus to a single country and a different time period – the second half of the 19th and the early 20th centuries – the third paper demonstrates that slavery was deeply detrimental to the development of local governments’ ability to tax and provide fundamental growth and welfare-enhancing public goods in Brazil.