Analysis of the Northeast Constitutional Financing Fund (FNE) on Municipal Economic Indicators in the Period 2010–2020

ABSTRACT This paper aims to evaluate the effects of the Constitutional Fund for Financing the Northeast (FNE) on the regional economy during the period from 2010 to 2020. To achieve this objective, we used the Generalized Propensity Score (GPS) econometric methodology, applying the analysis of dose–response functions proposed by Imbens (2000) and Hirano and Imbens (2004). We found evidence of positive and increasing impacts on the economic indicators of the municipalities benefiting from the FNE. Notably, we observed significant effects on Average Income, GDP per capita and Wage Mass when the resources were directed to women and legal entities. The results also suggest that there is some heterogeneity in the effect of the FNE according to the magnitude of the volume of credit contracted, with the exception of Average Income, which does not show an effect when the resources were contracted by women. In the case of total transfers, positive impacts on average income, GDP per capita and wage mass were observed only in the last levels of treatment. In summary, we can infer that FNE resources have a positive impact on the economic indicators of municipalities with higher contracted values.