The Political Economy of Slum Growth: Evidence from Brazil

One-fourth of the world’s urban population lives in slums and the number of slum residents grew from 650 million in 1990 to 1 billion in 2018. Existing explanations for slum growth focus on rural-urban migration and poverty. While these factors are relevant for rapidly urbanizing low-income countries, slum growth is frequent in highly urbanized, middle-income countries in Latin America. This paper provides evidence from Brazil that local government actions can increase slum growth without changes in poverty or immigration. Using a regression discontinuity design in close elections, I find that victories by a center-left, pro-poor party in the 2000 municipal election strongly increased the share of households living in slums in 2010 compared to 2000. I explore the mechanisms behind this result with a novel panel of census tracts and data on municipalities’ policies, expenditures, and sociodemographics. A more permissive attitude towards the formation of new slums is the main candidate to explain the observed effect.