Effects of the rural credit subsidy on economic growth and welfare of Brazilian regions

Debora Freire Cardoso, Erly Cardoso Teixeira, Angelo Gurgel and Eduardo Rodrigues de Castro

No 114464, Working Papers in Applied Economics from Universidade Federal de Vicosa, Departamento de Economia Rural

Abstract: The objective of this paper is to evaluate the impact of government spending with the Interest Rates Equalization (IRE) policy on the economic growth of Brazilian regions. Additionally, it aims to measure the opportunity cost of the subsidy in relation to an alternative application in the transportation sector. The model, database, and software from the General Equilibrium Analysis Project of the Brazilian Economy (PAEG) are applied to the simulations. The result shows that the IRE policy provides economic growth in the Midwestern, Northeastern and Southern regions above the cost of the policy. Besides, in the Northern and Southeastern regions, there is a decrease in the GDP. For Brazil, the policy is cost-effective and offers a 34% rate of return. Furthermore, all regions benefit in terms of welfare. For the country, in terms of GDP or welfare, spending on the IRE has negative alternative rate of return when applied to the transportation sector. The IRE policy is efficient and contributes to reduce regional disparities.

Keywords: Agricultural; and; Food; Policy (search for similar items in EconPapers)
Pages: 21
Date: 2011
New Economics Papers: this item is included in nep-geo
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:ags:ufvdwp:114464

DOI: 10.22004/ag.econ.114464

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