Accelerated growth of the sugarcane, sugar, and ethanol sectors in Brazil (2000-2008): Effects on municipal gross domestic product per capita in the south-central region

Abstract

During the 2000-2008 period, there was a marked acceleration in the growth of the sugarcane, sugar, and ethanol sectors of Brazil, which are most active in the south-central region of the country. Therefore, the objective of this study was to evaluate the effects of those sectors on the municipal gross domestic product (GDP) per capita in the south-central region of Brazil during that period. To that end, we constructed a theoretical model, estimating its parameters with a generalized method of moments system estimator and using spatial dynamic panel data to estimate the direct (municipal) effects and indirect (regional) effects. The cumulative direct and indirect effects increased the real municipal GDP per capita by 1028 $ in the host municipalities and by 324 $ in each of their 15 closest neighboring municipalities. On the basis of our findings, we can infer that the effects of establishing a sugar mill or ethanol plant are most significant for the host municipality and persist for at least 10 years after operations begin. Our results also indicate that sugarcane production has a significant, positive impact on municipal GDP per capita, not only in the municipalities where that production takes place but also in neighboring municipalities.