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Benefit Sharing Exploring Water Resources in Brazil

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  • Tiago P. Ferraz

Abstract

Large infrastructure projects may cause permanent impacts on their local environment, affecting the living conditions of local people in a negative manner. To mitigate impacts caused by installation of hydroelectric plants, Brazilian law provides that municipalities are compensated by the Compensação Financeira pelo Uso de Recursos Hídricos (CFURH) and the payment of royalties (Itaipu). In this work I test whether such payments have actually worked as a benefit sharing mechanism, examining its effects on some social and economic indicators by way of two steps procedure: first, the propensity score of municipalities benefiting from the compensation is estimated using georeferenced data from WWF’s project HydroSHEDS. Then, I estimate a difference-in-differences model, comparing the dependent variables in the control and treatment groups before and after the compensation. The results show a limited effect of the compensation on living conditions. Human Development Index (HDI) and infant mortality showed a little improvement, but illiteracy rate and income inequality worsened.

Suggested Citation

  • Tiago P. Ferraz, 2016. "Benefit Sharing Exploring Water Resources in Brazil," Working Papers, Department of Economics 2016_13, University of São Paulo (FEA-USP).
    • Handle: RePEc:spa:wpaper:2016wpecon13
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    File URL: http://www.repec.eae.fea.usp.br/documentos/TiagoFerraz_13WP.pdf
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    More about this item

    Keywords

    benefit-sharing; CFURH; royalties.;
    All these keywords.

    JEL classification:

    • H75 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Government: Health, Education, and Welfare
    • H76 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Other Expenditure Categories
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs

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