Effects of the rural credit subsidy on economic growth and welfare of Brazilian regions

The objective of this paper is to evaluate the impact of government spending with the Interest Rates Equalization (IRE) policy on the economic growth of Brazilian regions. Additionally, it aims to measure the opportunity cost of the subsidy in relation to an alternative application in the transportation sector. The model, database, and software from the General Equilibrium Analysis Project of the Brazilian Economy (PAEG) are applied to the simulations. The result shows that the IRE policy provides economic growth in the Midwestern, Northeastern and Southern regions above the cost of the policy. Besides, in the Northern and Southeastern regions, there is a decrease in the GDP. For Brazil, the policy is cost-effective and offers a 34% rate of return. Furthermore, all regions benefit in terms of welfare. For the country, in terms of GDP or welfare, spending on the IRE has negative alternative rate of return when applied to the transportation sector. The IRE policy is efficient and contributes to reduce regional disparities.


Issue Date:
2011
Publication Type:
Working or Discussion Paper
DOI and Other Identifiers:
Record Identifier:
https://ageconsearch.umn.edu/record/114464
PURL Identifier:
http://purl.umn.edu/114464
Page range:
1-21
Total Pages:
21
Series Statement:
Working Papers on Applied Economics
01/2011




 Record created 2017-04-01, last modified 2020-10-28

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