Urban Planning and Local Development: Evidence from Brazil

This paper studies the effects of mandated urban planning introduced by Brazil’s 2001 City Statute, which required municipalities with at least 20,000 inhabitants to adopt a master plan. Exploiting this population threshold in a fuzzy regression discontinuity design and combining survey, fiscal, census, and satellite data, I show that having a master plan generated sustained improvements in housing and urban infrastructure by strengthening local state capacity. Municipalities expanded their set of urban planning and land management instruments beyond the master plan and increased investment in housing and urban infrastructure, financed through higher land-based revenues. State governments further supported these investments by conditioning earmarked transfers on plan adoption.