PUBLIC INVESTMENT and ECONOMIC DEVELOPMENT: case study of Brazil from 1950 until 2006, based on a Keynesian and structuralist approach

Abstract

This paper investigates the relationship between public investment and economical development in Brazil from 1950 until 2006, based on a structuralist and Keynesian approach. After the theoretical specification of economic development and of the role of public investment in this process, the behavior of Brazilian economy is analyzed. The period under study is divided in two phases according to the model of State actuation: 1950-1979 and 1980-2006. The conclusion is that the great drop of public gross capital formation, mainly from state-owned enterprises, is one if the causes of the low Brazilian growth rate since the eighties. The mechanisms that explain this relationship are four, two by the supply side and two by the demand side. But it cannot be forgotten that public investment is a variable politically determined, so its behavior depends on the groups of interests in power and, consequently, on the macroeconomic regime adopted by them.