ABSTRACT
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 to avoid the approval of loans that have a negative benefit-cost relation. The paper uses theoretical models proposed by Shepsle and Weingast (1981SHEPSLE, K.A. & WEINGAST, B.R. (1981). “Political preferences for the Pork Barrel: a generalization”, American Journal of Political Science, Austin, TX, USA, v. 25, nº 1, pp. 96-112, Feb. 1981.) and Niou and Ordershook (1985NIOU, M.S. & ORDESHOOK, P.C. (1985). “Universalism in Congress”, American Journal of Political Science, Austin, TX, USA, v. 29, nº 2, pp. 246-258, Apr. 1985.), related to pork barrel projects, to show that The Federal Senate, responsible for the debt control, does not have 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 that want to raise loans. The paper proposes changes in the control rules, to make them efficient.
KEYWORDS:
Public expenditure composition; elections