| Abstract: | Since 2001, Brazil has experienced a sharp increase in sugarcane production due to the upsurge in demand for sugar and ethanol, two products derived from sugarcane. This study analyses the impacts of these sugarcane expansions on economic growth. The effects are examined at the municipality level in Brazil as a whole and in the main sugarcane producing regions, the North‐Northeast (NE) and the Centre‐South (CS). In this latter region, an additional distinction is made between the state of São Paulo (SP) and the Centre‐South region excluding São Paulo (CSex) since the bulk of the recent expansion took place in SP while most of the future expansions are planned in CSex. Estimators based on the propensity score are used to construct two types of counterfactual scenarios. The estimations in the first scenario show that municipalities in NE and CSex that expanded sugarcane production experienced economic growth as a result. No significant effect was found in SP. The second scenario focuses on CSex and establishes that sugarcane non‐expanding municipalities in this region would have had higher economic growth if they had increased sugarcane production. The results of this study suggest that future sugarcane plantations should indeed be located in CSex because they contribute to economic growth. |
