Of Cities and Slums

Abstract

We examine the emergence and persistence of urban slums along a country's path to urbanization. Upon evidence from Brazilian labor, housing, and education markets, we study the interaction of slums with structural transformation, education, and inequality. Slums are intergenerational steppingstones for low-educated households and hindrances for others, explaining their emergence and persistence over time. However, urban slums could be part of a country's expansion of human capital if children get access to the schools of cities. Nevertheless, for countries in earlier stages of development, the most impactful policies are in rural schools, which also prevent the formation of slums.

Keywords: Human capital, School locations, Structural transformation; Peer Effects., Peer Effects

JEL Classification: O15, O18, O64, R23, R31