Public expenditure and human development in Brazilian municipalities

Purpose: This study examines the relationship between the structure of public expenditure composition in Brazilian municipalities governments and the local human development in the period from 2005 to 2016. Methodology: Hypothesis testing was used to analyze the relationship between public spending in municipalities, which were categorized according to their spending indexes (SI), and the Indice Firjan de Desenvolvimento Municipal (Firjan Municipal Development Index; IFDM), a proxy for human development, based on the concept proposed by Sen (1999). Therefore, data from all 5,570 Brazilian municipalities were used, treated in an aggregated form using Data Panel analysis and Quantile Regression to more comprehensively address the heterogeneity of Brazilian municipalities. Results: The results make possible to infer that the changes in the public expenditure composition did not produce a striking improvement to the population's well-being. It is evident that despite the maintenance of social policies due to strong regulation by the central government, spending, although increasing in these areas, has not been producing the desired effects in improving the population's well-being indicators. Contributions of the Study: This research contributes to academia and society, as it shows that for Brazilian municipalities to make effective strides toward growing and toward sustainable human development indicators in a more incisive way, the hegemonization of the public expenditure policy requires adjustments. These adjustments could consider the idiosyncratic conditions of the different stages of human development in the subnational units.