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The Impact of Brazilian Regional Development Funds on Regional Economic Growth: A spatial panel approach

Author

Listed:
  • Guilherme Resende
  • Tulio Cravo
  • Alexandre Carvalho

Abstract

In Brazil, the regional development policy is directed by the regional development funds for the Northeast (FNE), the North (FNO), and the Central-West (FCO), which invested more than ?36 billion in lagging regions between 2004 and 2010. This policy seeks to facilitate the economic and social development of lagging regions by offering loans below market interest rates, primarily, to small-scale farmers and small industrial firms. This paper evaluates the economic impact of these Regional Funds using for the first time unique and recent data provided by the Brazilian Government. The study uses the different spatial scales of municipalities and micro-regions to analyse the impact of Regional funds on GDP per capita growth between 2004 and 2010. The results of the panel data estimations suggest that constitutional funds have some positive impact on GDP per capita growth mainly at municipality level, which is the smallest spatial scale. Nevertheless, the results estimated by fixed effect estimations neither control for spatial dependence nor provide evidence on the magnitude of the spatial spillover stemming from the Regional Constitutional Funds. Thus, to control for these caveats, this paper also applies the Spatial Econometrics estimator for panel data suggested by Elhorst (2010). The results indicate that different modalities of FCO, FNO and FNE affect regional growth differently and the spatial estimations did not indicate the existence of spatial spillovers stemming directly from the constitutional funds.

Suggested Citation

  • Guilherme Resende & Tulio Cravo & Alexandre Carvalho, 2014. "The Impact of Brazilian Regional Development Funds on Regional Economic Growth: A spatial panel approach," ERSA conference papers ersa14p123, European Regional Science Association.
    • Handle: RePEc:wiw:wiwrsa:ersa14p123
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    References listed on IDEAS

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    More about this item

    Keywords

    impact evaluation; regional development; regional funds; Brazil;
    All these keywords.

    JEL classification:

    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • R58 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Regional Development Planning and Policy

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