Slums: Poverty Traps or Stepping-Stones

About this event

Are slums stepping-stones to better lives or poverty traps? To address this crucial question, we leverage unique Brazilian administrative data sources to link children’s long run outcomes with those of their parents and examine intergenerational mobility at the neighborhood level within cities in most of urban Brazil. Slums, on average, offer no worse intergenerational mobility than formal neighborhoods due to offsetting effects of crime rates versus school quality and formal employment opportunities. We develop a spatial model with overlapping generations which captures the trade-offs parents face when choosing where to live and raise their children. The model integrates intergenerational human capital investment within an urban structure, emphasizing housing costs, access to educational opportunities, exposure to crime, and proximity to employment as key determinants of location decisions. We use the estimated model to quantify the relative importance of the different determinants of intergenerational mobility in slums versus non-slums in general equilibrium and thus shed light on the traits which make slums "traps" or "stepping-stones.”