The document discusses the economics of slums in developing countries, defining slums as informal settlements characterized by poor housing, inadequate services, and insecure tenure. It argues that slums serve as poverty traps, where investment inertia and policy failures hinder improvements in living standards, despite theories suggesting a link between economic growth and urbanization. The conclusion emphasizes the necessity for a holistic policy approach addressing various simultaneous issues like governance, health, and property rights to effectively combat the challenges associated with slum growth.

1. Economics of Slums
In Developing Countries

2. Slums
Definition:
Informal settlements in and around cities that has been
involved by rural migration to these areas.
Characteristics:
• Poor quality of housing.
• A lack of adequate living space and public services.
• Insecure tenure.

3. Argument
Provide historical and contemporary facts to argue that the
type of poverty observed in contemporary slums of the
developing world is characteristic of that described in the
literature on poverty traps.

4. Discussion
• Is there is a relationship between (urban-economic-slum)
growth?
• Is there an improvement in standard of living in slums?
• Why policy always fall?

5. Slums as Poverty Traps
• The human capital threshold effect.
• Investment inertia.
• Policy trap

6. Human Capital
• Education:
Universal free primary education laws have reduced disparities in
access to education between rural and urban settings.
• Health:
1. No private latrine.
2. No source of private water.
3. No garbage collection.
Slum dwellers may find themselves trapped in a low-skilled and
low-income equilibrium as the continuous influx of rural
migration.

7. Investment Inertia
• Property rights:
Without formal land titles, dwellers lack to incentives to improve the
quality of their homes and neighborhoods.
• Large private investments:
Concurrence of overcrowding and low marginal returns from small
upgrading investments.
• High rent premiums:
Dwellers must pay to live in close proximity to the city, and which reduce
opportunities for savings accumulation.
• Governance gap (absence):
Land and housing markets are often controlled by a handful of powerful or
well- connected individuals.
• Todaro paradox:
Slum living standards cannot be improved without generating an additional
influx of rural migrants, which in turn depresses public and private
investments in the existing settlements

8. The Policy Trap
• Political commitment:
Without political willing and support for reducing the
prevalence of slums, the problem still remains.
• Distorts the weight of slums in the political process:
Policy interventions are impossible to plan without accurate
population numbers.
• Political corruption
catering to the interests of the silent majority of slum
dwellers might not even be in the best interest of the people
in charge in the slum.

9. Slums and Economic
Development

10. Slums and Economic
Development
• Slum growth in a cross-country perspective.
• Slum growth in an intergenerational perspective.

11. Slum growth in a cross-
country perspective
Question:
Is there a functional relationship between economic growth,
urban growth and prevalence of slums?
• In a cross-country regression framework, the prevalence of
slums in any given country was significantly correlated with a
variety of aggregate economic indicators, including GDP per
capita (negatively), the debt stock and debt service, and
inequality measured by the Gini coefficient (positively).
• However, cross-country correlations overlook widely
heterogeneous situations, as rapid urbanization rates in
developing countries are often not associated with fast
economic growth.

12. It appears that the connection between economic growth and slum
growth across countries is quite diverse, without a uniform pattern.

13. Slum growth in an
intergenerational perspective
Question:
Is there evidence that standards of living are improving
within slums, and across generations of slum dwellers?
• Living standards do not seem to be improving over time.
• Households that improved their condition over the period
may no longer live in the slum, while other poor
households may have migrated into the slum.

16. Limitations of Past
Approaches in Slum Policy
In this section, we discuss what policy approaches towards
slums have been taken and why these approaches have been
largely unsuccessful.
• Eviction.
• Benign Neglect.
• Aided Self-help.
• Land titling .

17. Evictions
it is quite clear that slum clearance does not address the
roots of the slum problem.

18. Benign Neglect
• No policing of squatters.
• No provision of public services.
• Policy makers “the market will take care of it”.

19. Aided Self-help
Urban poor find creative solutions to improve their live
hoods as long as the government improve the local
environment (basic structure).

20. seem an adequateDidn’t
policy lever to transform
slum conditions in a
meaningful way

21. Land titling paradigm
• Home investment become safer for poor house holds
• Slum house hold become able to access credit market to
finance investment to create small business and educate
their children

22. However,
• Titling programs alone cannot be expected to lift
households out of poverty and to overhaul existing social
and economic dynamics within the slum, because existing
systems of ownership act to preserve these dynamics.
• In fact, land titling is more likely to benefit the
“slumlords” and hurt, at the bottom of the pyramid, the
slum renters, either in the form of outright evictions or
increased rents in the titled area.

23. Conclusion
• Yet the challenge of slums is not simply one of housing policy:
a holistic approach is needed to address housing needs for rural
migrants, health and sanitation issues, local governance,
private savings and investments, and land market institutions.
• Both formal and informal systems of property rights may be
necessary to curb the rapid growth of slum areas worldwide.
• In the absence of strong policy agendas similar to those, it
seems unlikely that slums will disappear in the foreseeable
future.
• Without a political willingness to change governance dynamics
in slum areas, to deal with the actors who have taken these
land in the absence of the government.

24. Reference
• Benjamin Marx, Thomas Stoker, and Tavneet
Suri.2013. “ The Economics of Slums in The Developing
world.” Journal of Economic Perspectives—Volume 27,
Number 4—Fall 2013—Pages 187–210