Maisy Wong from The Wharton School, University of Pennsylvania will present "Slum Upgrading and Long run Urban Development Evidence from Indonesia", with Mariaflavia (Nina) Harari.
Abstract: Developing countries face massive urbanization under weak property rights. Slum upgrading is a popular policy to improve shelter for many, but preserving slums at the expense of formal developments may entail future opportunity costs. We investigate these dynamic inefficiency concerns by estimating the long-term impacts of the 1969-1984 KIP program, which provided basic upgrades to 5 million residents in Jakarta, Indonesia. We assemble high-resolution data on program boundaries and current outcomes, including novel photographs-based slum indexes. Among historical slums, KIP areas today have on average 15% lower land values, 50% fewer high-rises, and are more informal, consistent with delayed formalization. A boundary discontinuity design yields similar results. Surplus calculations show heterogeneous opportunity costs, with 90% of the losses concentrated in half of the program areas, where land values are high. Elsewhere, KIP delivers sizable surplus. Our exercise informs the debate on whether to upgrade or formalize slums as cities expand.