(In)formal living: India's dual urban housing supply elasticities

Abstract

We study housing supply in the world's largest country. We show that droughts and highway infrastructure investments in one region of India affect housing demand in its other regions through migration. Using these migration-inducing shocks as demand-shifters, we estimate urban India's formal and informal housing (slum) supply elasticities. Our informal elasticity estimate provides empirical evidence of gentrification, that is, informal-to-formal conversions with rising rents. Our formal supply elasticity estimates indicate that Indian cities are supply inelastic.

Keywords: Housing Supply, Migration, India

JEL Classification: J61, R23, R31