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Slum Upgrading and Long-run Urban Development: Evidence from Indonesia

Author

Listed:
  • Mariaflavia Harari

    (The Wharton School, University of Pennsy)

  • Maisy Wong

    (University of Pennsylvania)

Abstract

The United Nations estimates that a quarter of the world’s urban population lives in slums. This paper sheds light on how a developing country city grows out of informality, through the lens of one of the largest slum upgrading programs in the world. The 1969-1984 Kampung Improvement Program (KIP) provided basic public goods in slums, covering 5 million people and 25% of the city of Jakarta, Indonesia. We assemble a granular database with program boundaries, historical maps, current land values, building heights, measures of land fragmentation, and a novel quality index of informal settlements based on Google Street View and field photos. Our research design compares KIP areas with historical slums that were never treated. Our findings are similar using a boundary discontinuity design. KIP areas today have 12% lower land values and buildings with 1.6 fewer floors on average, implying aggregate impacts of US$11 billion. Greater land fragmentation in KIP areas points towards the importance of land assembly costs as a barrier to formalization. These long-term costs need to be weighed against the benefits of the program. Overall, our findings suggest slum upgrading may be more cost effective for cities in early stages of urban development.

Suggested Citation

  • Mariaflavia Harari & Maisy Wong, 2018. "Slum Upgrading and Long-run Urban Development: Evidence from Indonesia," 2018 Meeting Papers 367, Society for Economic Dynamics.
  • Handle: RePEc:red:sed018:367
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    File URL: https://economicdynamics.org/meetpapers/2018/paper_367.pdf
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    References listed on IDEAS

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    1. Sharon Barnhardt & Erica Field & Rohini Pande, 2017. "Moving to Opportunity or Isolation? Network Effects of a Randomized Housing Lottery in Urban India," American Economic Journal: Applied Economics, American Economic Association, vol. 9(1), pages 1-32, January.
    2. Esteban Rossi-Hansberg & Pierre-Daniel Sarte & Raymond Owens, 2010. "Housing Externalities," Journal of Political Economy, University of Chicago Press, vol. 118(3), pages 485-535, June.
    3. Neeraj Baruah & Amanda Dahlstrand-Rudin & Guy Michaels & Dzhamilya Nigmatulina & Ferdinand Rauch & Tanner Regan, 2017. "Planning Ahead for Better Neighborhoods: Long Run Evidence from Tanzania," SERC Discussion Papers 0222, Spatial Economics Research Centre, LSE.
    4. Benjamin Marx & Thomas Stoker & Tavneet Suri, 2013. "The Economics of Slums in the Developing World," Journal of Economic Perspectives, American Economic Association, vol. 27(4), pages 187-210, Fall.
    5. Leah Brooks & Byron Lutz, 2016. "From Today's City to Tomorrow's City: An Empirical Investigation of Urban Land Assembly," American Economic Journal: Economic Policy, American Economic Association, vol. 8(3), pages 69-105, August.
    6. Erica Field, 2007. "Entitled to Work: Urban Property Rights and Labor Supply in Peru," The Quarterly Journal of Economics, Oxford University Press, vol. 122(4), pages 1561-1602.
    7. Feler, Leo & Henderson, J. Vernon, 2011. "Exclusionary policies in urban development: Under-servicing migrant households in Brazilian cities," Journal of Urban Economics, Elsevier, vol. 69(3), pages 253-272, May.
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