Infrastructure-Driven Development: The Local Social Impact of a Large Hydropower Plant in the Amazon

Abstract

The Brazilian Amazon is marked by attempts at infrastructure-driven development. The construction of the Belo Monte dam, the third-largest in the world, brought chaotical and rapid urbanization to surrounding cities. This paper answered whether the Belo Monte dam impacted the level of violent crime in the region after Altamira was ranked as the most violent city in Brazil in 2015. Following a difference-in-difference approach, I explore the timing of the Belo Monte dam construction and the distance from the construction site to identify the causal effect of unplanned urbanization on homicide rate. In two exogenous shocks, the beginning (2011) and the end of the construction (2015), I estimated a significant rise in the homicide rate in closer cities. The results are driven by criminal activity, with drug trafficking being one of the channels behind the rising homicide rate during construction. The homicide victims are mainly the young male population causing a significant loss of human capital. The increasing homicide rate after the end of the construction indicates that the Belo Monte dam may have a long-term effect on the violence level in the region. Violence imposes high social costs and may jeopardize future growth in the Amazon.