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The Effects of Public Expenditure on Municipal Development: A Dynamic Panel Approach

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Abstract

We investigate the effects of public expenditure on municipal development in the state of Rio Grande do Sul, Brazil. The definition of development adopted is based on the capability approach, and the methodology used is that proposed by Hsiao et al. (J Econom 109(1):107–150, 2002. https://doi.org/10.1016/S0304-4076(01)00143-9), in which dynamic panels with fixed effects are estimated using quasi-maximum likelihood estimators. The study’s contributions include the econometric approach used and the concept of multidimensional development as a dependent variable. The results point to the positive effects of public expenditure in all the analyzed scenarios. These effects are not linear, being up to 2.7 times higher among municipalities with the lowest per capita expenditure. This analysis lends weight to the suggestion that allocative redistribution of expenditure could positively impact people’s living conditions without increasing its overall volume.

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Funding

The Coordenação de Aperfeiçoamento de Pessoal de Nível Superior (CAPES - Brazil) granted the first author a partial scholarship for his Marter’s studies.

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Authors and Affiliations

  1. State Treasury Department of Rio Grande do Sul, Porto Alegre, RS, Brazil

    Guilherme Correa Petry

  2. Pontifical Catholic University of Rio Grande do Sul, Av. Ipiranga, 6681, Prédio 50, Sala 1105, Porto Alegre, RS, CEP: 90619-900, Brazil

    Ely José de Mattos

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  1. Guilherme Correa Petry
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Petry, G.C., de Mattos, E.J. The Effects of Public Expenditure on Municipal Development: A Dynamic Panel Approach. Soc Indic Res 165, 695–714 (2023). https://doi.org/10.1007/s11205-022-03040-2

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