Journal Articles Summaries - Book Report/Review Example

The variation in the per capita revenues was the resultant of the variation in natural endowments as well as a boom in commodity had asymmetric impacts among the states. The two effects combined to generate variation in revenues per capita. The fiscal decentralization adopted by the Brazilian states in 1891 also contributed to the cause. The constitution provided sole right to tax exports. The variable estimates of the export prices would confirm that the states with commodities that witnessed higher increases in prices had lower risk premium.

The aim of the report is to find whether endowments play any role in determination of cost of capital of a country or a state. What is the time period analyzed? The time period that has been taken under consideration in the report is 1891 to 1930. The study encircles around the determinants of risk premium of the bonds that were issued by the states of Brazil in the period 1891 to 1930. The period has been characterized as a phase of tremendous delegation of fiscal revenues and spending in the country.

It has been argued that endowments do matter in determination of cost of capital as the revenues were generated by the taxes levied upon the prices of the commodities by the states. What is/are the data source(s)? The first table in the journal article is derived from “A divida publica extrema do Brazil” from A. Abreu. Te second table has been derived from “Economia e finances dos estados do Brazil” by Lyra. The next table was taken from the Directoria Geral de Estatisca of the industry of commerce.

What are the main findings? In the study endowments have been defined by a set of natural factors that includes climatic conditions and some other geographical constraints that act to the farmer from producing crops. The per capita state public revenue and risk premium share a strong relationship. The relationship has been defined by with a chain of price indices of product exports by state. From the estimations of the Cox hazard model it can be seen that per capita state public revenue has a consistent, positive and significant effect over the hazard rate of issuing a new bond in the market.

The last regression undertaken in the study was done controlling the size of the debt burden using the ratio of debt to exports. The size of the sample got reduced in the last regression. The coefficient still has the expected sign and it is significant at the confidence interval of 10%. The coefficient in the lag of the state public revenue acts as the indicator in depicting those states that went on to collect additional unit of revenue was exposed to relative risk of issuing their first international bond in any year within a certain range.

The probit estimations concluded the effects of increasing the public revenue per capita infinitely increased the probability of issuing an international bond by a certain percentage. It can be found here that unlike the Cox model the size of the population increased the probability of issuing the bond. The investors took the historical high cost of capital into account which made it difficult for the states to issue new bonds. The main finding from the study showed that the states with higher capability to collect tax revenue increased the pro