Institutional Environment and Growth in Brazil

An institution is a society or organization founded for a religious, educational, social or similar purpose, and it is an established law, practice, or custom. Douglass North and Barry Weingast, economists, believe that innovation which fueled the Industrial Revolution was due in part by institutional changes. Institutions are influential because they have the ability to effect transaction costs and rates of return on investments, which influences economic growth. Before the Industrial Revolution, British reforms of 1689 created an institutional foundation that allowed the state to matter in economic development. Their fiscal system created an institution in which they could prosper.

Not all aspects of economic growth are positive, for example when an economy is at, or near its full capacity of productivity prices can be driven up causing inflation and the devaluing of their currency, where each unit of currency buys fewer goods and services that it previously could have. It can increase the

Economic growth, put simply, is “an increase in the amount of goods and services produced per head of the population over a period of time”; development is inextricably linked with this economic growth. By utilising theories of economic growth and development we can see how the Chinese and Sub-Saharan African economies have emerged, but, more notably, we can use these to look at patterns from past and present to show their experience and the implications of this growth for the future.

First of all it’s totally based on the level of economy. Economic growth is calculated by rise in gross domestic product, or GDP, which is defined as the combined value of all goods and services produced within a country in a year. Many forces contribute to economic growth; unfortunately, no one is 100% clear about what these forces are or how to put them into

Economic growth occurs when there is a sustained increase in a country’s productive capacity over a period of time. Economic growth is often measured by an increase in real Gross Domestic Product (GDP). Brazil in recent years entered an economic slowdown, after a decade of strong growth in the 2000’s (averaging 4.4% between 2006 -11) underpinned by the global resources boom. Strong global demand for its commodity exports, combined with high commodity prices, helped brazil achieve sustained economic growth. This in

Economic growth positively produces more jobs and a strong level of economic growth can help individuals who are willing to find employment. Countries

Prepared for the Handbook of Economic Growth edited by Philippe Aghion and Steve Durlauf. We thank the editors for their patience and Leopoldo Fergusson, Pablo Querubín and Barry Weingast for their helpful suggestions. The views expressed herein are those of the author(s) and not necessarily those of the National Bureau of Economic Research. ©2004 by Daron Acemoglu, Simon Johnson, and James Robinson. All rights reserved. Short sections of text, not to exceed two

First it is of vital importance to define what we precisely mean by institutional change. In his acclaimed book, Douglass North mentions that institutional change will only be driven when relative prices and preferences of organizations change. Institutions are overwhelmingly incremental and will adapt and change its organization through continuous marginal adjustment. Institutions conforming nation-states are thus, non-static and will continuously adapt to different circumstances. North also mentions that change in preferences and prices can be exogenous, namely a plague, an economical crisis, or a colonizing power. However, North stresses the importance that the process of institutional change also includes “maximizing efforts of endogenous

Eyeballing any cross sectional data on growth across countries shows that countries grow at different rates. Many theories try to explain this phenomenon with emphasis with capital accumulation being one of them. I will start by developing the standard neoclassical growth model as developed by Solow(1956)[1]. I will then proceed to discuss the extensions that have been made to this basic model in an attempt to better understand actual growth figures, for e.g. the standard neoclassical model cannot explain the magnitude of international differences in growth rates. Mankiw[2] points out that “the model can explain

The institutionalists’ on the other hand focus on group norms. The analysis of labour markets and employment systems relies on the existence of stable, slow-changing and fairly transparent institutions to provide the foundations for their analysis (Wootton, 1955). The work of social norms has been the foundation upon which institutionalist theorists try to explain how and why labour market structures are the way they are.

He pointed out that different economic levels have their own requirements and they may not follow the same process of industrialization. Moreover, he raised the most influential theory related to late industrialization that the economically backward states may have rapider growth rate as they are late comers, and the national development process relied on the degree of economic backwardness. That is to say the more backward a country, the faster it will advance (ibid).

In the Acemeglu, Johnson and Robinson article, “Institutions as a Fundamental Cause of Long Term Growth”, the authors emphasize how institutions are the main determinant of economic development because stronger institutions allow for more growth in education, security, and health. To observe whether strong institutions determine economic growth it is important to mention the characteristics of a strong institution that allows for fast growth. Strong institutions are able to enforce property rights, a fair judiciary, efficient bureaucracies, intellectual property rights, corporation government bankruptcy laws, and democracy (e.g. “(Lecture 13)”). Going in depth

There are many questions what arise from the topic of the economic growth. For instance, how can nations speed up their economic growth? There are many successful strategies to self-sustained economic growth. According to Keynesian policy prescriptions, long term growth can be achieved through structural policies such as supply-side policies, which would improve the long term performance of the economy. Supply-side policies emphasize incentives and tax cuts as a means of increasing economic growth. Such policy was espoused by President Reagan in the USA, but also Prime Minister Thatcher in Great Britain, (Nordhaus & Samuelson, 2005). Supply-side economists argue, that high taxes lead people to reduce their labour and capital supply. Arthur Laffer has suggested that the high tax rates might actually lower tax revenues, (Nordhaus & Samuelson, 2005). This Laffer-curve preposition holds that high tax rates shrink the tax base because they reduce economic activity. However, mainstream, economists doubt the Laffer preposition that cutting tax rates would increase tax revenues, ref. They believed that there 's a need for a radical restructuring of the tax system called supply-side tax cut, REF. According to this philosophy, reform should improve incentives by lowering marginal tax rates . This would lead to lowering tax burden on high-income individuals, but also encourage productivity and supply

This can be measured by the following formula; Per capita nominal GDP = Nominal GDP / Population, Per capita real GDP = Real GDP / Population. Seven factors determine economic growth. Natural resources such as land, mineral deposits, waterways; climatic conditions provide an essential foundation to economic growth. Combined with the other resources of capital, labor and enterprises, natural resources can be developed and organized to increase the productive capacity if the nation. Consequently the quality and size of the labor force is a major determinant of economic growth. Education and vocational training are essential the growth potential of a nation. The promotion of education and job training schemes increase the knowledge, skills and flexibility of the workforce that contributes to potentially higher levels of productivity and efficiency. Whether from natural increase or immigration population growth can cause a higher level of economic growth. An increasing population requires increased public spending on housing, education and other social needs while businesses expectations of

will be explain here. In deductive approach, Investigator has to pay attention on the development of research hypothesis by which we can reach to result. Formation of hypothesis is totally depend on the predetermine study and discovered theories. When the hypothesis is complete than investigator have to test these hypothesis on the basis of collected data may be it can accept or reject .There are following three steps by which we can use the deductive method approach.