Pereira, Ana Elisa Gonçalves Nakabashi, Luciano Sachsida, Adolfo
Year of Publication:
Texto para Discussão, Instituto de Pesquisa Econômica Aplicada (IPEA) 1623
The Brazilian municipalities show a huge disparity in income level. The GDP per capita difference between the richest and the poorest municipalities is about 190 times, according to IBGE (2000) database. Institutionalist theory provides a plausible explanation for the gap among municipalities income level. Many empirical studies based on crosscountry data have found a high correlation between institutional quality and the level of economic development, but there is little research concerning the extreme inequality within the national territory and its relationship with institutional quality. The theory suggests that the institutions matter for the level of economic development because of their effects on political power distribution, generation of economic opportunities, innovation, human capital accumulation, and so on. Considering the above mentioned theory, the present study analyzes the impacts of Brazilian municipalities institutional quality on their levels of per capita income.