Benefit Sharing Exploring Water Resources in Brazil

Tiago P. Ferraz ()

No 2016_13, Working Papers, Department of Economics from University of São Paulo (FEA-USP)

Abstract: Large infrastructure projects may cause permanent impacts on their local environment, affecting the living conditions of local people in a negative manner. To mitigate impacts caused by installation of hydroelectric plants, Brazilian law provides that municipalities are compensated by the Compensação Financeira pelo Uso de Recursos Hídricos (CFURH) and the payment of royalties (Itaipu). In this work I test whether such payments have actually worked as a benefit sharing mechanism, examining its effects on some social and economic indicators by way of two steps procedure: first, the propensity score of municipalities benefiting from the compensation is estimated using georeferenced data from WWF’s project HydroSHEDS. Then, I estimate a difference-in-differences model, comparing the dependent variables in the control and treatment groups before and after the compensation. The results show a limited effect of the compensation on living conditions. Human Development Index (HDI) and infant mortality showed a little improvement, but illiteracy rate and income inequality worsened.

Keywords: benefit-sharing; CFURH; royalties. (search for similar items in EconPapers)
JEL-codes: H75 H76 I38 (search for similar items in EconPapers)
Date: 2016-07-28
New Economics Papers: this item is included in nep-cse and nep-ppm
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