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The Welfare Consequences of Formalizing Developing Country Cities: Evidence from the Mumbai Mills Redevelopment - TDPE

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Moynihan Institute of Global Affairs, Trade, Development and Political Economy


The Welfare Consequences of Formalizing Developing Country Cities: Evidence from the Mumbai Mills Redevelopment

Authors: Michael Gechter and Nick Tsivanidis

A talk by Michael Gechter, Assistant Professor of Economics, Pennsylvania State University

The authors exploit a unique natural experiment in Mumbai, India that led 15% of central city land occupied by the city’s defunct textile mills to come onto the market for redevelopment in the 2000s. Second, they use a “deep learning” approach to measure slums from satellite images, and combine this with administrative sources to construct a uniquely spatially disaggregated dataset spanning the period. Third, they develop a quantitative general equilibrium model of a city featuring formal and informal housing supply to guide our empirical analysis. They find evidence of substantial housing and agglomeration externalities, and provide reduced-form evidence suggestive of both efficiency gains (through increased employment density in central areas) and potential equity losses (through the conversion of slums and gentrification near redeveloped mill sites). 

Michael Gechter is Assistant Professor of Economics at the Pennsylvania State University. His research focuses on the effects of interactions between regulations, informality, and state capacity on allocative efficiency.

For more information, contact Devashish Mitra,

Sponsored by: Moynihan Institute of Global Affairs, Trade, Development, and Political Economy

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