Comparing social-economic conditions in ethanol production areas in Brazil and United States : a spatial econometric approach

The production of ethanol has increased in United States and Brazil in recent years, because of incentives to reduce gas consumption. In Brazil, there is a big program to use ethanol both as a single fuel or an additive to gas. In US, the incentive is to use ethanol combined to gas in proportion that can reach to 85 percent of the mix. This situation has prompted the need to assess the economic, social and environmental impacts of this process, both for the country as a whole and for the regions where this has occurred. Doubts that can be raised, for example, concerning the quality of employment, the environmental impacts (soil contamination, atmospheric pollution from burning fields, water use, etc.) and dislocation of other crops to native forests, among others. Even though the balance of costs and benefits is, in general, positive from an overall standpoint, this may not be so in specific producing regions, due to negative externalities. The producing regions may disproportionately bear the negative impacts of the sector's presence. Perhaps the most obvious aspect in this respect is the labor market, since many studies have analyzed the working conditions in the sector, particularly those encountered in manual harvesting, in Brazilian case. It is recognized that sugarcane is significantly more valuable by tilled area than many other crops, such as soybeans, for example. The objective of this paper is to estimate the effect of growing sugarcane on socio-economic indicators (like GDP, HDI or others) in ethanol producing regions, comparing differences in results of Brazilian regions with American ones. In the literature on matching effects, this is interpreted as the effect of the treatment on the treated. Location effects are controlled by spatial econometric techniques, giving rise to the spatial propensity score matching model. This work extends the results from Chagas, Toneto-Jr. and Azzoni (2011), analysing the producing regions in both countries according its social and economics characteristics, as well the producing characteristics.