Of Cities and Slums

Produced by: 
Federal Reserve Bank of St. Louis
Available from: 
October 2016
Paper author(s): 
Pedro Cavalcanti Ferreira
Alexander Monge-Naranjo
Luciene Torres de Mello Pereira
Topic: 
Poverty - Inequality - Aid Effectiveness
Year: 
2016

The emergence of slums is a common feature in a countryís path towards urbanization, structural transformation and development. Based on salient micro and macro evidence of Brazilian labor, housing and education markets, we construct a simple model to examine the conditions for slums to emerge. We then use the model to examine whether slums are barriers or stepping stones for lower skilled households and for the development of the country as a whole. We calibrate our model to explore the dynamic interaction between skill formation, income inequality and structural transformation with the rise (and potential fall) of slums in Brazil. We then conduct policy counterfactuals. For instance, we Önd that cracking down on slums could slow down the acquisition of human capital, the growth of cities (outside slums) and non-agricultural employment. The impact of reducing housing barriers to entry into cities and of di§erent forms of school integration between the city and the slums is also explored.

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Research section: 
Latest Research
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