Vol. 42 No. 3 (2022): Jul-Sep / 2022

Vol. 42 No. 3 (2022)

Jul-Sep / 2022
Published August 17, 2022


Managing Contagion: COVID-19, public health, and reflexive behavior
John B. Davis
Brazilian Journal of Political Economy

This paper characterizes a pandemic as a kind of contagion, and describes a
contagion as a two-level, two-direction, reflexive feedback loop system. In such a system,
expert opinions for managing a pandemic can act as self-fulfilling prophecies due to how
they influence collective belief formation. However, when multiple experts produce multiple
expert opinions that act as self-fulfilling prophecies, this can fragment a society’s response to
a pandemic, worsening rather than ameliorating it. This paper models this possible outcome
by distinguishing two competing expert opinions, appealing respectively to people in club
good and common pool types of employment/health insurance situations, and argues that to combat fragmentation of opinion about how to address a pandemic, public health policy
needs to attend to the nature of public reasoning. It argues this entails asking how just and
legitimate deliberative institutions can function in an ‘inclusive and noncoercive’ way that
allows society to reconcile competing visions regarding how to combat system-wide crises
such as pandemics.

JEL Classification: A13; H41; H70; I100.

Productivity, investment and capital flow: the failure of growth with foreign savings in Brazil
Marcos Tostes Lamonica, Sergiany da Silva Lima
Brazilian Journal of Political Economy

This work analyzes productivity and the hypothesis that capital flow does not
influence investment in the Brazilian economy. To do so, we present a productivity equation
conditioned on the rates of: investments, wage costs, and external demand. The relationship
between productivity and investment and wage rates suggests a possible simultaneity, given
the distributive nature of aggregate income between capital and labor. Therefore, estimators
that treat endogeneity in two stages are used: the Two-Stage Least Squares (MQ2E) and the
Generalized Least Moments (MMG), to increase the robustness of the results. We find that
the investment rate explains productivity, but capital flow does not determine productive investment. In addition, Brazilian investment is more susceptible to the parameters of
marginal capital efficiency, whose fall has affected Brazilian productivity since the 1980s.

JEL Classification: O11; O16; 047.

Globalization, deglobalization and Brazil
Renato Baumann
Brazilian Journal of Political Economy

The last three decades have witnessed important changes in transportation,
communication and data processing, with effects over productive processes, trade flows and
the international movement of capital. From the viewpoint of developing economies this led
to the recommendation of adhering to this process as a tool to foster economic and social
development. As for the Brazilian economy, its participation in the process of globalization
has been limited so far, except for the movement of capital. Its share in total merchandise
trade is low, as is the number of preferential trade agreements. It has not been possible to
reduce the “economic distance” towards the high-income economies.

JEL Classification: F13; F21; F43; F50; O57.

From the mainstream economics research frontier towards critical institutional political economy
Fernando García-Quero, Fernando López Castellano
Brazilian Journal of Political Economy

The attack of the traditions of political economy upon the orthodox economics
is directed at the pillars supporting its political philosophy and at the core of its deductive
and individualist methodology. This criticism challenges the current mainstream economics
research frontier, which includes the notions of ‘new’ institutional economics, among others.
Recalling the tradition known as the ‘Other Canon’, this article criticises these theories and
reclaims the principal arguments of a real critical institutional political economy agenda,
based on the significant role of history in economic and social analysis, the inductive
methodology and the emphasis on power relationships and interest conflicts.

JEL Classifications: B14; B31; B52; L22.

The evolution of thinking about the State in Peter Evans’s view – a theoretical approach
Vinicius Peçanha
Brazilian Journal of Political Economy

The paper discusses the evolution of Peter Evans’ thought about the theoretical
conditions in which the State can act in order to promote the development of a country. In
a first moment of his thinking, Evans builds the concept of “inserted autonomy”, which is
the basis for his analysis of the development of countries, focused on capital accumulation
and industrial transformation. Evans later recognizes the need to expand this discussion
to broader social groups. The approach used by the author, although similar, is built on
a different theoretical body, which involves a new conceptualization of development. In
this second stage, Evans approaches the idea of deliberative democracy as the mainstay of
development, conceptualizing the 21st century developmental state model.

JEL Classification: B25; B52; D73; H11; P16.

A further deterioration of the Brazilian fiscal reaction in view of COVID-19
Eduardo Lima Campos, Rubens Penha Cysne, Alexandre L. Madureira
Brazilian Journal of Political Economy

The fiscal reaction function measures how the government’s primary surplus
reacts to the evolution of public debt. Campos and Cysne (2019b) observed that the
reaction function has been almost steadily decreasing since 2012 and it has turned from
positive to negative values in 2017 and 2018. In the subsequent period, the improvement
of some economic indicators led the fiscal reaction to a recovery. Nevertheless, in 2020,
with the advent of COVID-19, health spending and emergency aids caused a sharp fiscal
deterioration, leading the fiscal reaction coefficient to assume, again, negative values.

JEL Classification: H30; H60; E50.

Infrastructure, private expectations and investment
Jefferson S. Fraga, Marco Flávio da Cunha Resende
Brazilian Journal of Political Economy

Economic literature has highlighted that infrastructure investment shows
positive externalities which foster the economic growth. Based upon the Post-Keynesian
perspective, the aims of this article are twofold: i) to explain the interactions among
infrastructure, conventions, expectations and aggregate private investment, summarized
in what Keynes called technically social investment; ii) to show in theoretical terms that
discontinuities of infrastructure investments reduce the sensitivities of private aggregate
investment in relation to its determinants, with economic policy implications. In the Post-
Keynesian view, private investment is volatile and sensitive to changes in conventions and
expectations. We show that infrastructure spending stimulates private investments because it
reduces uncertainty and coordinates the emergence of private conventions and expectations
that foster private investments.

JEL Classification: H54; O40; E20.

Public banks and monetary policy: theory and some results based on state dependent local projections
André de Melo Modenesi, Nikolas Passos
Brazilian Journal of Political Economy

We test the hypothesis that public banks reduce monetary policy power for
Brazilian economy, during the 2000-2018 period. Previous studies have shown that
companies with access to government driven credit present smaller fall in investment and
production after a contractionary monetary policy shock. Nevertheless, these studies are
based on microeconomic data and ignore cost-push effects of monetary policy. We employ
state dependent local projections (Jordà, 2005) to compare monetary policy power (defined
as the sensibility of inflation to changes in basic interest rate) between periods of high credit
of public banks and periods of high credit of private banks. We do not find evidence that
monetary policy is less powerful in periods of high credit of public banks. Even though
periods of high credit of public banks present a lower effect over output, those periods
present less persistent price puzzles than periods of high private credit. We conduct several
robustness tests to confirm our results. We attribute those results to lower flexibility in
interest rates of credit from public banks, what leads to lower transmission in financial costs,
lower reduction in capital stock and lower puzzle in exchange rate.

JEL Classification: E5; E51; E58; E63.

MERCOSUR in trade policy clusters: challenges and prospects
Alexandra Gennadyevna Koval, Ekaterina Konstantinovna Andrianova
Brazilian Journal of Political Economy

The sharp increase in the number of FTAs puts customs unions in an ambiguous
situation questioning their effectiveness. In this view, MERCOSUR could attract special
attention as it seems to support the intention to revive integration within the block after a
long period of stagnation. This paper identifies asymmetries and similarities in the member
states’ trade policy and presents a new perspective on the regional integration by means
of cluster analysis. The results of the study provide the answer to the question of whether
MERCOSUR countries have common trade patterns and can act as a single block in the
international trade.

JEL Classification: F13; F15.

The role of capital movements in Latin American balance of payments in 1990-2019
Gustavo Burachik
Brazilian Journal of Political Economy

We studied the balance of payments data for a set of Latin American countries
between 1990 and 2019. We intended to quantify the main items of foreign exchange
income and expenditure. We were particularly interested in studying the magnitude and role
of financial flows, either as a source of external resources or as an item of expenditure. The
analysis was carried out in two dimensions: cross section (for a sample of 11 nations) for
the entire period and over time for the three decades covered by the data. This study offers
an empirical basis to reassess the traditional view that places an “external constraint” on
growth in the foreign trade. In contrast, the data analyzed here suggest that items related to
financial flows are the main responsible for external vulnerability of these countries.

JEL Classification: G01; H12; F32.

The twin deficit theory in a dynamic consistent stock-flow model for an open economy
André Mellini, Guilherme Jonas Costa da Silva
Brazilian Journal of Political Economy

This paper aims to incorporate explicitly the twin deficits theory in a stock-flow
consistent model to analyze the impact of fiscal policy and public debt dynamics in a post-
Keynesian model, investigating the effects and limitations. Even rejecting many neoclassical
hypotheses, fiscal policy has limitation to stimulate permanently economic growth because
if it’s incompatible with balance of payment equilibrium, net external debt would rise and
become unsustainable. Finally, this hypothesis is tested empirically and it is verified that the
dynamics of the fiscal policy and external position are associated when specified according
to Godley and Cripps (1983) and modified by Pérez Caldentey (2007).

JEL Classification: E12; E62; F41; F43.

Fiscal compliance and Behavioral Economics: an analysis of the influence of the decision context
Ana Carolina Astafieff da Rosa Costa, Morgana G. Martins Krieger, Yuna Fontoura
Brazilian Journal of Political Economy

Tax evasion remains a relevant problem in Brazil and worldwide. Behavioral
Economics has sought to understand this behavior by carrying out experiments that aim
to understand the decision-making process of individuals. This work aims to analyze how
the structure of the decision-making context can influence the effectiveness of behavioral
interventions that seek to increase tax compliance. Through content analysis of scientific
articles in the area, five contextual categories were identified that influence the experiments.
Thus, the research provides an understanding of contextual aspects and how they influence
the design of interventions.

JEL Classification : B40; B41; C90; C91; C93; D91; H26; H30; D91; K34.