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

Guilherme Correa Petry () and Ely José Mattos ()
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Guilherme Correa Petry: State Treasury Department of Rio Grande do Sul
Ely José Mattos: Pontifical Catholic University of Rio Grande do Sul

Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, 2023, vol. 165, issue 2, No 14, 695-714

Abstract: 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.

Keywords: Public expenditure; Human development; Effects of public expenditure; Dynamic panels (search for similar items in EconPapers)
JEL-codes: H5 O2 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/s11205-022-03040-2

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