Danilo Rocha Limoeiro
July 13, 2020 Forthcoming
Reference - 240 Pages - 38 B/W Illustrations
ISBN 9780367896515 - CAT# 351467
Series: Routledge Studies in the Modern World Economy
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Researchers in international development have long argued that the high costs of doing business harms prosperity in developing countries, a claim that invites the question of why governments impose these costs and why societies fail to enact reforms reducing them. This book seeks to answer the question by looking at the case of Brazil, a large and highly unequal economy riddled with state-imposed transaction costs.
By delving into the political dynamics underlying a costly business environment, this book provides the reader with novel insights into crony capitalism and inequality. It argues that the root cause of a costly business environment is the collusion between political actors, bureaucrats and business insiders. Politicians and bureaucrats relish their discretion over rules and policies as a power resource, since they can increase or decrease the costs of doing business faced by firms and sectors. Business insiders collude with government agents to access the loopholes that decrease the cost of doing business, thus gaining a competitive edge over outsiders. This gives the insiders weaker preferences for reforms that could decrease the overall cost of doing business. By pursuing their self-interest, these actors create a low-level equilibrium that perpetuates crony capitalism and inequality, to the detriment of overall prosperity. The book makes its case with a sophisticated combination of formal modelling, quantitative analyses and in-depth case studies of tax policy and of the pharmaceutical and agricultural sectors in Brazil.
Observers have declared the need for reforms that improve the business environment in developing countries for a long time. However, the findings presented in this book suggests they might have underestimated the challenge ahead. Scholars and policy-makers in international development, business politics and political economy will be interested in the innovative perspective of this book.
List of figures
List of tables
1 Cronyism, Growth and Inequality
1.1 Ricardo’s predicament and the argument in short
1.2 Contribution: Understanding Ricardo’s predicament
1.3 Roadmap: A central puzzle and its explanation
1.4 Capitalism, Regulation, Left and Right
2 Crony Capitalism: Actors, Continuity and Change
2.1 Crony capitalism in Brazil
2.5 Formalizing the argument
3 Industry Leaders and Political Engagement
3.1 Are industry leaders more politically engaged?
3.2 Testing the hypothesis in Brazil
4 The Politics of Taxation in Brazil
4.1 Disjoint layering and the tax system.
4.2 Subnational taxation and tax breaks
4.3 Tariff policies
5.1 Functions and distortions of bureaucracies
5.2 The pharmaceutical industry in Brazil
5.3 The cases of S˜ao Paulo and Goias
5.4 Anvisa: Welcomed but unloved
5.5 Why not fight back against regulatory distortion?
6.1 Blurred lines
6.2 The agricultural boom in Brazil
6.3 Demand for Pareto optimal reforms
6.4 The bootstrap sector? 311
6.5 The Political Clout of Agribusiness