Applied Micro Seminar - Nick Tsivanidis (UC Berkeley Haas)

Abstract: This paper investigates local spillovers from high-rise, market-rate buildings in developing country cities. We exploit a unique natural experiment that led most of Mumbai’s 60 textile mills, which covered 15% of central city land, to be redeveloped into high rises during the 2000s. Using a unique set of newly digitized data, we document sizable local spillovers consistent with these new developments gentrifying their surrounding neighborhoods. To analyze the indirect and distributional effects, we develop and estimate a dynamic quantitative urban model with informality and slum evictions. The redevelopments benefit Mumbai’s residents in aggregate by increasing residential housing supply and providing valuable commercial floorspace for formal firms, but inflict large costs on forcibly relocated slum dwellers. Making Mumbai’s compensation policy for evicted slum residents significantly more generous would substantially reduce losses to the losers while mildly reducing aggregate surplus. This highlights an equity-efficiency trade-off inherent to slum redevelopment policy.

Location: B03 Ricardo LT