BEYOND FISCAL RETURNS: THE SOCIOECONOMIC IMPACT OF PUBLIC INVESTMENT IN BRAZIL
DOI:
https://doi.org/10.56238/arev7n12-084Keywords:
Regional Inequality, Public Expenditures, Social Policy, Institutional Change, DevelopmentAbstract
Public investment is generally theorized to decrease inequality, yet its real-world influences hinge on governance. This study analyzes how Brazil’s public budget allocation shapes socioeconomic vulnerability. The main finding reveals a paradox: while investments significantly reduce vulnerability in low-income areas, institutional failures undermine their potential, including misallocation and elite capture. Using subnational data on completed projects, we show that agricultural, urban, and social spending in disadvantaged regions achieves measurable welfare gains. However, these are systematically diluted by politicized resource distribution and weak oversight. Our findings highlight how political economy constraints transform public investment from a redistribution tool into a mechanism reinforcing spatial and class inequalities. By linking fiscal policy with vulnerability outcomes, we offer a framework for analyzing the institutional roots of inefficient spending in unequal democracies, with implications for reform in Brazil and beyond.
Downloads
References
Acconcia, A., Corsetti, G., & Simonelli, S. (2014). Mafia and public spending: Evidence on the fiscal multiplier from a quasi-experiment. American Economic Review, 104(7), 2185–2209.
ADB, A. A., Furceri, D., & IMF, P. T. (2016). The macroeconomic effects of public investment: Evidence from advanced economies. Journal of Macroeconomics, 50, 224–240.
Akhtari, M., Moreira, D., & Trucco, L. (2022). Political turnover, bureaucratic turnover, and the quality of public services. American Economic Review, 112(2), 442–493.
Armand, A., Coutts, A., Vicente, P. C., & Vilela, I. (2020). Does information break the political resource curse? Experimental evidence from Mozambique. American Economic Review, 110(11), 3431–3453.
Asher, S., & Novosad, P. (2020). Rural roads and local economic development. American Economic Review, 110(3), 797–823.
Azzimonti, M. (2011). Barriers to investment in polarized societies. American Economic Review, 101(5), 2182–2204.
Bardhan, P. (2002). Decentralization of governance and development. Journal of Economic Perspectives, 16(4), 185–205.
Barro, R. J., & Sala-i-Martin, X. (1990). Economic growth and convergence across the United States. National Bureau of Economic Research Cambridge, Mass., USA.
Battaglini, M., & Coate, S. (2007). Inefficiency in legislative policymaking: a dynamic analysis. American Economic Review, 97(1), 118–149.
Bobonis, G. J., Gertler, P. J., Gonzalez-Navarro, M., & Nichter, S. (2022). Vulnerability and clientelism. American Economic Review, 112(11), 3627–3659.
Bouakez, H., Rachedi, O., & Santoro, E. (2023). The government spending multiplier in a multisector economy. American Economic Journal: Macroeconomics, 15(1), 209–239.
Bremer, B., Di Carlo, D., & Wansleben, L. (2023). The constrained politics of local public investment under cooperative federalism. Socio-Economic Review, 21(2), 1007–1034.
Buchheim, L., & Watzinger, M. (2023). The Employment Effects of Countercyclical Public Investments. American Economic Journal: Economic Policy, 15(1), 154–173.
Bustos, P., Caprettini, B., & Ponticelli, J. (2016). Agricultural productivity and structural transformation: Evidence from Brazil. American Economic Review, 106(6), 1320–1365.
Caselli, F., & Michaels, G. (2013). Do oil windfalls improve living standards? Evidence from Brazil. American Economic Journal: Applied Economics, 5(1), 208–238.
Castel, R. (1995). De la exclusión como estado a la vulnerabilidad como proceso. Archipiélago, 21, 27–36.
Cutter, S. L., Boruff, B. J., & Shirley, W. L. (2003). Social vulnerability to environmental hazards. Social Science Quarterly, 84(2), 242–261.
Cutter, S. L., Boruff, B. J., & Shirley, W. L. (2012). Social vulnerability to environmental hazards. In Hazards vulnerability and environmental justice (pp. 143–160). Routledge.
De Desenvolvimento, B. I., & others. (2019). Improving infrastructure financing in Brazil.
De Mello Jr, L. R. (2002). Public finance, government spending and economic growth: the case of local governments in Brazil. Applied Economics, 34(15), 1871–1883.
Esteban, J., & Ray, D. (2006). Inequality, lobbying, and resource allocation. American Economic Review, 96(1), 257–279.
Goldfajn, I., Martínez, L., & Valdés, R. O. (2021). Washington consensus in latin america: From raw model to straw man. Journal of Economic Perspectives, 35(3), 109–132.
Halunga, A. G., Orme, C. D., & Yamagata, T. (2017). A heteroskedasticity robust Breusch–Pagan test for Contemporaneous correlation in dynamic panel data models. Journal of Econometrics, 198(2), 209–230.
Hsieh, C.-T. (2002). What explains the industrial revolution in East Asia? Evidence from the factor markets. American Economic Review, 92(3), 502–526.
Lewbel, A. (2012). Using heteroscedasticity to identify and estimate mismeasured and endogenous regressor models. Journal of Business & Economic Statistics, 30(1), 67–80.
Lipscomb, M., Mobarak, A. M., & Barham, T. (2013). Development effects of electrification: Evidence from the topographic placement of hydropower plants in Brazil. American Economic Journal: Applied Economics, 5(2), 200–231.
Noël, A. (2020). Is social investment inimical to the poor? Socio-Economic Review, 18(3), 857–880.
Romer, P. M. (1994). The origins of endogenous growth. Journal of Economic Perspectives, 8(1), 3–22.
Romer, T. (1988). Nobel laureate: On James Buchanan’s contributions to public economics. Journal of Economic Perspectives, 2(4), 165–179.
Solga, H. (2014). Education, economic inequality and the promises of the social investment state. Socio-Economic Review, 12(2), 269–297.
Solow, R. M. (1994). Perspectives on growth theory. Journal of Economic Perspectives, 8(1), 45–54.
Spence, M. (2021). Some thoughts on the Washington Consensus and subsequent global development experience. Journal of Economic Perspectives, 35(3), 67–82.
World Bank. (2023). A Balancing Act for Brazil’s Amazonian States: An Economic Memorandum. World Bank Publications.
