Tales Chenso da Silva Rabelo

The present study analyzes the government's influence over the economies’ growth rates. It is divided in 4 parts. At the first, eminently theoretical, a meticulous re-write of the formalization  of the government activities in an autarchical economy with balanced budget is performed  in line with Barro (1990) and Barro and Sala-i-Martin (1992). At the second, also theoretical, it is simulated the impact of a constrained tax burden (and/or debt capacity) over economies’ growth rates in agreement with the model of Aizenman, Kletzer and Pinto (2007). The sequence of the work is predominantly empiric. After analyzed the effects of the debt and budget composition over the economies with the aid of Semmler and Greiner (2000) model; the research focuses on the evolution of the budget composition of Brazilian economy. Particularly, it is discussed the effect of the budget’s bounds implicit on the 1988 constitution, and the rise on current expenses with a consequent reduction on the public  infrastructure investments from 90’s to now. This trade-off coincides with the set-up of Semmler and Greiner (2000) model, making possible simulations over the best options of fiscal policies from disturbances on the effective observed budget coefficients for Brazilian economy along the period 1991-2005. Particularly, it is discussed how a reduction on the government's consumption would increment the public infrastructure, increasing the economy potential product.  Finally, in line with time series data for Brazilian economy over the period 1991-2005, it is estimated the structural parameters of the economy through the generalized method of moments. Nevertheless, it is analyzed the evolution of the Brazilian infrastructure composition over the period 1950-2005 emphasizing  the reduction of public capital over the total capital stock in the economy. The research verifies that the reduction in the volume of public investments over the last two decades coincides with a significant reduction in the economy’s growth rate.