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Slums, allocation of talent, and barriers to urbanization

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  • Rivera-Padilla, Alberto

Abstract

Slums are a prevalent urban phenomenon in developing countries. They are locations with low-quality dwellings, often built on valuable land, that allow poorer households to access urban markets that otherwise would be unattainable. I build a spatial general equilibrium framework to analyze the aggregate effects of urban policies in India. The model takes into account individual selection and location differences in returns to education, productivity, and housing rents. I find that demolishing slums in the most productive areas decreases the urban population, with negative effects on welfare and no gains in labor productivity. In contrast, eliminating formal housing distortions increases the urban population while decreasing the presence of slums by a significant amount. It also increases welfare and labor productivity by 6.8 and 1.3 percent, respectively.

Suggested Citation

  • Rivera-Padilla, Alberto, 2021. "Slums, allocation of talent, and barriers to urbanization," European Economic Review, Elsevier, vol. 140(C).
    • Handle: RePEc:eee:eecrev:v:140:y:2021:i:c:s0014292121002166
    DOI: 10.1016/j.euroecorev.2021.103908
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    1. Yang, Xintong & Dong, Xin & Yi, Chengdong, 2022. "Informal housing clearance, housing market, and labor supply," Labour Economics, Elsevier, vol. 78(C).

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    More about this item

    Keywords

    Slums; Urbanization; Productivity; Migration; Human capital;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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