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Local Economic Impacts of Hydroelectric Power Plants: Evidence from Brazil

Author

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  • Costa, Francisco J M

    (FGV EPGE Brazilian School of Economics and Finance)

  • Szerman, Dimitri
  • Assunção, Juliano

Abstract

This paper assesses the distribution of short- and medium-run effects of the construction of large hydroelectric power plants (HPPs) on the economic development of Brazilian municipalities. Using the synthetic control method, we estimate the effects for each of the 82 municipalities affected by HPP construction between 2002 and 2011. Three main findings emerge. First, the average impact of HPP construction on the local economy follows an inverted U-shape over a five-year horizon (the average construction time is four years). Second, the median impact of construction in the medium run is positive but modest, with no effect on the composition of local economic activity (i.e., structural transformation). Third, the estimated effects are highly heterogeneous. For instance, while the median impact of an HPP construction on GDP growth rate is close to zero five years after its construction, the 75th percentile of the treatment effects distribution is a 6.7 percentage points increase, while the 25th percentile is a 7.9 percentage points decrease. These results do not provide support for the argument that large construction works unequivocally spur local development.

Suggested Citation

  • Costa, Francisco J M & Szerman, Dimitri & Assunção, Juliano, 2018. "Local Economic Impacts of Hydroelectric Power Plants: Evidence from Brazil," SocArXiv kzhs6, Center for Open Science.
    • Handle: RePEc:osf:socarx:kzhs6
    DOI: 10.31219/osf.io/kzhs6
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