Personnel expenses in Brazilian municipalities benefit by oil royalties: evidence of improper allocation of such resources

Abstract

In Brazil, the law has not strictly defined, until 2013, how oil royalties should be used. Nevertheless, Law no 8001/1990 prohibited the use of oil royalties for payment of permanent staff. This paper aims to verify if the oil royalty stimulated personnel expenses in Brazilian municipalities from 1999 to 2015. To this end, using a panel data analysis, the null hypothesis is that royalties do not affect the limits established by the Brazilian Fiscal Responsibility Law. Nevertheless, the results brought light to the fact that oil royalties have been used to expand personnel expenses.