Slums and Pandemics

This paper studies the role of slums in shaping the economic and health dynamics of pandemics. Using data from millions of mobile phones in Brazil, an event-study analysis shows that residents of overcrowded slums engaged in less social distancing after the outbreak of Covid-19. We develop a choice-theoretic equilibrium model in which individuals are heterogeneous in income and some people live in high-density slums. The model is calibrated to Rio de Janeiro. Slum dwellers account for a disproportionately high number of infections and deaths. In a counterfactual scenario without slums, deaths increase in non-slum neighborhoods. Policy simulations indicate that: reallocating medical resources cuts deaths and raises output and the welfare of both groups; mild lockdowns favor slum individuals by mitigating the demand for hospital beds, whereas strict confinements mostly delay the evolution of the pandemic; and cash transfers benefit slum residents to the detriment of others, highlighting important distributional effects.