CONVERGENCE IN THE LOCAL SPENDING OF MUNICIPALITIES IN BAHIA

Abstract

Since Baumol (1986), the debate on convergence has targeted on the assessment of economic growth. This work aims to contribute to the literature by investigating whether the growth in government spending, like income, is associated to a convergence process. In particular, the analysis considers the convergence of per capita budget expenditures for the municipalities of Bahia between 2003 and 2019. The convergence hypothesis is associated with the decreasing marginal return of government spending. The results suggest that there is evidence for beta-convergence of budget expenditures per capita and also for GDP per capita. The estimates indicate that municipalities with lower budget expenditures per capita take 7.3 years to reduce the difference in relation to localities with higher per capita expenditures by half, which is the definition of half-life. The half-life found is shorter for budget expenditures per capita (7.3 years) than for GDP per capita (12 years).