Localities in developed countries often restrict construction and population growth through regulations governing land usage, lot sizes, building heights, and frontage requirements. In developing countries, such policies are less effective because of the existence of unregulated, informal housing markets. Cities in developing countries that seek to limit in-migration must also discourage entry into informal housing by providing low levels of public services to this sector. In this paper, we analyze the causes of slums, using data from Brazilian urban areas. We develop a model of the decisions that localities make to affect in-migration and find evidence that localities act strategically. Richer and larger localities in an urban area reduce provision of water and sewerage connections to the smaller houses in which poorer migrants would live to discourage the in-migration of these poorer migrants and deflect them to other localities. We also find that under-servicing smaller houses reduces the population growth rate of localities. Not only does it reduce the in-migration of low-educated households, it seems that, because of negative externalities, such under-servicing also reduces the growth rate of higher-educated households.
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Length: Date of creation: Jun 2008 Date of revision: Handle: RePEc:nbr:nberwo:14136
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Find related papers by JEL classification: D7 - Microeconomics - - Analysis of Collective Decision-Making H7 - Public Economics - - State and Local Government; Intergovernmental Relations J6 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies O15 - Economic Development, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration O54 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean R5 - Urban, Rural, and Regional Economics - - Regional Government Analysis
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