Aspectos institucionais da "performance" fiscal de estados e municipios

This paper shows that the rules established to control state and municipal debt in Brazil are inefficient. They cannot prevent the excessive growth of the debt nor avoid the approval of loans that have a negative benefit-cost relation. The paper uses theoretical models to show that the federal senate, responsible for debt control, does not maintain enough incentives to restrict the debt. The strategy chosen by the majority of senators, trying to maximize the probability of being reelected, results in the approval of all applications made by states and municipalities to raise loans. The paper proposes changes in the control system to make it more efficient. (Rev Econ Polit/DÜI)