The role of public spending in the economic growth of Brazilian states: an analysis of panel data

Abstract

The present work seeks to analyze the effect of the allocation of public expenditure on the growth rate of the federation units, evaluating expenditures in two groups, investment and costing. With this, we intend to make some progress in relation to the literature that deals with the subject by applying, in panel data, a set of models that encompass, in addition to the “pooled” models, fixed and random effects, dynamic specifications with estimators. obtained by the Generalized Moments Method (GMM). The data used refer to the expenses included in the fiscal and social security budget of the state and municipal governments of Brazil in the period from 1998 to 2019. The series of public expenditure and investment of these governments were grouped by state in real series annual. The results show that public investment showed its coefficient significantly different from zero, but with small magnitude, in only a few dynamic models, both for developed and developing groups. On the other hand, the coefficient on current expenditures presented a statistically different value from zero in almost all models, dynamic or not, with a magnitude higher than those found for public investments. Furthermore, the costing coefficients were higher in the less developed group when compared to the same model in the developed group in almost all cases, which demonstrates the greater importance of this type of expenditure on economic growth for these states.