Mobility Of Primary Factors and its Effects on Economic Growth and Welfare Generated by Rural Credit in Brazilian Regions

Talita Pinto, Erly Teixeira and Angelo Gurgel

No 332646, Conference papers from Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project

Abstract: This paper investigates the effects of primary production factor mobility on economic growth and welfare generated by the interest rate equalization policy (ETJ) in the agricultural sector in the Brazilian regions. This study uses the General Equilibrium Analysis Project for the Brazilian Economy (PAEG) to perform the analytical simulations. The study analyzes a scenario in which the value of the ETJ policy and the subsidized rural credit provided by the ETJ are eliminated from agriculture. The subsidized credit is reallocated among the various sectors in the economy. The scenario is analyzed considering the mobility of three different primary production factors among Brazilian regions: zero mobility, partial mobility and complete mobility. The results are presented with the signals exchanged to obtain the effects of ETJ policy on the economy. The results suggest that GDP growth is lower than the subsidy cost in all Brazilian regions except in the Midwestern and Southearn regions with complete factor mobility. In terms of generating economic growth, the ETJ policy therefore presents a negative rate of return. When one considers the analysis in terms of welfare, the shock effects are positive and higher than the cost of the policy to all regions of Brazil. In terms of welfare generation, the ETJ policy therefore presents a positive rate of return.

Keywords: Agricultural; Finance (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:ags:pugtwp:332646

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