Descriptive and econometric analysis of the Brazil’S municipal institutional quality indicator

Abstract

From the perspective of explaining the gaps in the development process of world economies, the institutional framework enriches the economic literature by inserting the "institutions" as an important element of understanding and encouraging the behavior of today's economies. Supported by a theoretical current initiated by T. Veblen and reworked by a new strand, which he belonged to Douglass North, found the empirical application through cross country research and later on intra-country analysis. The regional disparities observed in Brazil also became the target of these studies which saw in institutional quality the answer to this phenomenon. Thus, this paper investigates the relationship between the institutional quality of Brazilian cities and the level of income. That means to analyze the effects that municipal institutions have on economic performance, and on a given set of socioeconomic and geographic variables, among which there is the proxy of corruption built for each municipality. For this, it was measured the Municipal Institutional Quality Indicator, which allowed an interpretation of Brazil's profile in 2010, and also a comparison to the elaborate indicator in 2000. The results indicate a gradual improvement in the comparison between the indicators and a trend of spatial concentration of the highest scores in the central-south zone of the country coinciding with the best national income levels, confirmed by empirical tests the significant existence of this relationship. In addition, the results show the great influence that social factors has on the indicator, and it remains unchanged when used geographic instrumental variables.