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The Economics of Slums in the Developing World

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  • Benjamin Marx
  • Thomas Stoker
  • Tavneet Suri
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    Abstract

    The global expansion of urban slums poses questions for economic research as well as problems for policymakers. We provide evidence that the type of poverty observed in contemporary slums of the developing world is characteristic of that described in the literature on poverty traps. We document how human capital threshold effects, investment inertia, and a "policy trap" may prevent slum dwellers from seizing economic opportunities offered by geographic proximity to the city. We test the assumptions of another theory -- that slums are a just transitory phenomenon characteristic of fastgrowing economies -- by examining the relationship between economic growth, urban growth, and slum growth in the developing world, and whether standards of living of slum dwellers are improving over time, both within slums and across generations. Finally, we discuss why standard policy approaches have often failed to mitigate the expansion of slums in the developing world. Our aim is to inform public debate on the essential issues posed by slums in the developing world.

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    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jep.27.4.187
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    Bibliographic Info

    Article provided by American Economic Association in its journal Journal of Economic Perspectives.

    Volume (Year): 27 (2013)
    Issue (Month): 4 (Fall)
    Pages: 187-210

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    Handle: RePEc:aea:jecper:v:27:y:2013:i:4:p:187-210

    Note: DOI: 10.1257/jep.27.4.187
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    1. Erica Field, 2005. "Property Rights and Investment in Urban Slums," Journal of the European Economic Association, MIT Press, vol. 3(2-3), pages 279-290, 04/05.
    2. Markus Goldstein & Christopher Udry, 2008. "The Profits of Power: Land Rights and Agricultural Investment in Ghana," Journal of Political Economy, University of Chicago Press, vol. 116(6), pages 981-1022, December.
    3. Abhijit V. Banerjee & Paul J. Gertler & Maitreesh Ghatak, 2002. "Empowerment and Efficiency: Tenancy Reform in West Bengal," Journal of Political Economy, University of Chicago Press, vol. 110(2), pages 239-280, April.
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    6. Besley, Timothy, 1995. "Property Rights and Investment Incentives: Theory and Evidence from Ghana," Journal of Political Economy, University of Chicago Press, vol. 103(5), pages 903-37, October.
    7. Richard Hornbeck, 2010. "Barbed Wire: Property Rights and Agricultural Development," The Quarterly Journal of Economics, MIT Press, vol. 125(2), pages 767-810, May.
    8. Edward Miguel & Michael Kremer, 2004. "Worms: Identifying Impacts on Education and Health in the Presence of Treatment Externalities," Econometrica, Econometric Society, vol. 72(1), pages 159-217, 01.
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    11. Kaushik Basu, 2003. "Analytical Development Economics: The Less Developed Economy Revisited," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262523442, December.
    12. Barton H. Hamilton, 2000. "Does Entrepreneurship Pay? An Empirical Analysis of the Returns to Self-Employment," Journal of Political Economy, University of Chicago Press, vol. 108(3), pages 604-631, June.
    13. Christopher Woodruff, 2001. "Review of de Soto's The Mystery of Capital," Journal of Economic Literature, American Economic Association, vol. 39(4), pages 1215-1223, December.
    14. Sebastian Galiani & Paul Gertler & Ryan Cooper & Sebastian Martinez & Adam Ross & Raimundo Undurraga, 2013. "Shelter from the Storm: Upgrading Housing Infrastructure in Latin American Slums," NBER Working Papers 19322, National Bureau of Economic Research, Inc.
    15. Hornbeck, Richard A., 2010. "Barbed Wire: Property Rights and Agricultural Development," Scholarly Articles 11185832, Harvard University Department of Economics.
    16. Field, Erica Marie, 2005. "Property Rights and Investment in Urban Slums," Scholarly Articles 3634150, Harvard University Department of Economics.
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