Multiplicadores fiscais subnacionais: uma análise empírica dos municípios brasileiros

Abstract

This paper aims to estimate the Keynesian expenditure multipliers across types of spending, such as health, social protection, social security, sanitation, and education at the municipal level in Brazil. Even though there is a vast literature on fiscal multipliers at the national level using time series analysis, empirical estimates of the impact of public expenditures on GDP growth at the subnational level are scant. Brazil may be a particularly interesting case study since its subnational governments were granted high autonomy in the decision-making process of public budget allocation. However, subnational governments in Brazil have great limitations in access to credit and do not have autonomy in issuing money, making a wellplanned fiscal policy their main tool for action. Many issues still need to be investigated, one of which is the capacity of local governments to stimulate economic activity through the strategic planning of public expenditures. To assess this topic, we used yearly data from 2011 to 2016, covering all 5,570 Brazilian municipalities. We used the two-step GMM-System method, with the instrumental variable approach to control for endogeneity. Fixed-Effects models were also estimated as a robustness check. Our results suggest a market heterogeneity in the expenditure multipliers both across types of spending and over time. We found that education expenditures have the highest multiplier effect both in the short- and long-run.The results of this work suggest that fiscal adjustment strategies tend to perpetuate crisis by reducing spending on priority areas.