Public funding for investments in infrastructure: the case of the road improvements program in Brazil

Abstract

This paper investigates the effects of the Provias program, from BNDES, on socioeconomic indicators and general ledger expenses accounts of Brazilian municipalities that have enrolled to the program between 2006 and 2016, using the Propensity Score Matching methodology. The results show a positive and statistically significant impact of Provias only in the investment expenses, with no significant results related to the other expenses accounts or socioeconomic indicators. The overall results suggest that although the municipalities spent the Provias resources in investments, those did not have positive economic or social impacts. Furthermore, the participation in the program by municipalities located in states from the South region – in addition to Minas Gerais, Mato Grosso do Sul and Mato Grosso – was clearly higher, and a big part of the firms that provide machinery and equipment to the public road paving services in Brazil are located in the South region and Southeastern region states. An additional empirical analysis suggests that the firms of this sector that were located on these states were relatively more benefited than the others during the period studied.