Micro�?Impacts of the Brazilian Regional Development Funds: Does Lending Size Matter?

Abstract

This paper evaluates the micro‐impacts of regional development funds in Brazil—the Constitutional Financing Funds (CFF)—using fixed effects panel data models and generalized propensity score between 2000 and 2012. Assessing the industrial and commerce/services sectors using fixed effects models, the results provide weak evidence of a positive and statistically significant impact of the CFF on job creation and no statistically significant impact on labor productivity growth at the firm level. Regarding dose‐response estimates, the results present evidence of nonlinear effects after three years of financing, suggesting that the amount of subsidized credit plays an important role in creating jobs and improving firm productivity.