Annual Report 2018
Economics
目
唱
ECONOMIC POLICY
AND GROWTH
The study examines the causes and consequences of shantytowns
during the structural transformation of countries. Specifically,
it investigates the conditions in the markets for education, labor
and housing that lead to the emergence of urban slums.
OBJECTIVE
•
To study the interplay of rural-urban migration, urbanization and education.
RESEARCH METHOD
•
•
We used a dynamic model with two productive sectors, agriculture on the one hand and
services and manufacturing on the other. The dwelling decision of individuals considers
three possible places: rural region, urban shantytown and urban non-shantytown, where
the accumulation of human capital depends on the dwelling locale.
The model reproduced through computational methods the evolution of the Brazilian
economy in these different dimensions. Our calibrated model replicated the observed
growth of shantytowns (favelas), urbanization, sectorial employment and distribution of
education in Brazil from 1950 to 2005.
We then investigated via computational experiments the effect of different public poli-
cies on income, sectorial allocation of labor and urbanization.
First, the cost of habitation in cities increased (e.g., due to greater regularization or taxa-
tion), leading to growth of favelas, but this did not affect the rural-urban migration, given
that the migrants could still establish residence in favelas.
A second policy forbade/removed favelas, preventing the poorest contingent from living
in those areas. This policy maintained a large population in the countryside for a longer
period, with a strong effect on output and welfare.
E
2.
3.
The location of households has a strong impact on the educational performance of
their children. Our conclusion is that marginal urban areas (favelas) are much worse
than regular areas of the city, but much better then rural areas.
The dwelling costs in the city are higher than in rural areas, preventing some families
with low qualification from migrating to cities.
CONTRIBUTIONS OF THE STUDY
•
We argue that instead of posing a barrier to urban migration, favelas are a place of sup-
port for families with low job qualification. For these families, living in favelas provides bet-
ter job market opportunities and formation of human capital than living in the countryside.
However, when compared with living in regularized urban regions, favelas act as a barrier
in terms of opportunities for human capital formation. We show that giving children living
in favelas access to schools in regular city areas would improve their school performance.
In the aggregate this would lead to a smaller proportion of favelas in cities, because the
country's labor force would be less concentrated in workers with low qualification.
Besides this, we conclude that barriers of access to favelas -and the maintenance of
households with low qualification in rural areas - would decelerate the acquisition of hu-
man capital at the lower end of the distribution, inducing even larger favelas in the future.
APPLICATIONS OF THE RESULTS AND POSSIBLE EXTENSIONS OF THE STUDY
•
There are three well-defined avenues for future research:
1. Go beyond the human capital formation model and examine in more detail the fac-
tors that drive the results of schooling in rural areas and poor urban areas. The expla-
nation for the causes of the differences of location of teachers, financing and other
educational inputs could suggest a broader scope for public policies.
2.
Consider a setting composed of various cities or various urban districts. With respect
to households with low qualification, this richer scenario could more precisely cap-
ture the consumption-education tradeoffs offered to these households by living in
the countryside in relation to different cities and favelas.
3. Extend the "one home/two goods/three occupations" model adopted in this study
and consider more elaborate models that manage to capture the impact of the distri-
bution of income on the demand for personal services and other urban occupations
requiring low skill levels, as one of the main drivers of the formation of urban favelas.
RESULTS
.
Three aspects stand out in the Brazilian experience:
1. Living in a favela is an alternative for individuals who cannot pay the costs of living in
regularized areas of cities. It also gives adults in the household access to urban labor
markets in general, but this access comes with direct costs, as it reduces the educa-
tional options for children to the favela itself and surrounding areas.
40
AUTHORS:
João Victor Issler, Pedro Cavalcanti Ferreira and Roberto Castello Branco.
ORGANIZATION:
Center for Growth and Economic Development Studies (Growth and Development).
SUPPORT:
Applied Research Fund (FPA FGV).
Annual Report 2018
41
RESEARCHView entire presentation