Slums: Poverty Traps or Stepping-Stones?

About this event

By 2024, 1.1 billion people globally (25% of urban populations) lived in slums. Yet, our understanding of their defining characteristics and effects on social mobility remains limited. We leverage comprehensive data, covering 7,000 slums and 6 million residents across Brazil's 19 largest metropolitan areas, to fill these gaps. We show that slums are not distinguished by inferior infrastructure or housing quality compared to low-income formal neighborhoods. Instead, lack of formal land tenure in slums creates "state voids" – areas embedded within cities, often adjacent to affluent formal neighborhoods, but without state governance. This creates unique opportunities for slum residents in terms of access to jobs and education, but often at the cost of higher exposure to violent crime. While this trade-off translates into lower average intergenerational mobility in slums, outcomes vary dramatically, with some working as “poverty traps”, and others as “stepping stones”. We develop and estimate a spatial structural model that rationalizes these facts and use it to assess the equilibrium and distributional effects of slum upgrading and other targeted policies.