Oil Royalties and the Provision of Public Education in Brazil

Abstract

This paper examines how resource-based windfalls to Brazilian municipalities’ revenues affects their provision of education. Using within-municipality variation in per capita oil revenues transferred to municipalities, we find that receiving more oil royalties increases municipal education expenditures, which translates into more teachers, classrooms, and schools per capita. These effects are present only for municipally funded schools, implying that increased educational provision is due to better funding and not through increased demand for schooling. We also find, however, that some evidence that some types of school infrastructure and services may be affected by oil royalties, implying that this additional schooling coverage may be of lower quality. Interestingly, despite the increased provision of education student outcomes like the dropout rate worsen with higher oil royalties, although this may be due to changes in student composition.

Keywords: oil royalties, public education, Brazil

JEL Classification: O13, Q33, R53