The Brazilian regional development funds and economic growth: A spatial panel approach

The regional development policy in Brazil materializes mainly in the regional development funds for the north-east (FNE), the north (FNO), and the centre-west (FCO), in which more than EUR36 billion was invested between 2004 and 2010. This paper examines the economic effect of these regional development funds using for the first time a unique and recent data provided by Brazil's government. The study uses spatial panel models and different spatial scales of municipalities and micro-regions to analyse the effect of development funds on regional GDP per capita growth during 2004-10. The results suggest that development funds have positive impact on GDP per capita growth mainly at municipality level. Furthermore, the results indicate that different modalities of FCO, FNO, and FNE affect regional growth differently.