Spatial distribution of local economic performance: empirical analysis of employment, income and poverty in Brazilian municipalities

Abstract

Local economies within a country differ substantially in their economic performance and such differences might persist over long periods of time. Increasing concern with regional disparities and poverty levels have prompted a growing interest in understanding factors giving some places better conditions for enhancing performance and overcoming development challenges. In particular, researchers and policy makers have been trying to investigate the potential roles of public policy at local level. Here, the key question relates to the capability of local governments in significantly impacting their realities despite their historic, economic, social and geographical constraints. The central aim of this paper is to empirically investigate the factors influencing local development across Brazilian municipalities, emphasizing the role of local public policy. To do that we adopt spatial econometric models inspired by growth theory and by some recent development of spatial economics. Our results contribute to the identification of determinants of local economic development measured by three variables, namely employment change, income per capita change and the change in the population below the poverty line. From the empirical estimates evidence is provided regarding the factors suggested by the recent literature on growth, development and spatial economics.