Efficiency And Equity Of Land Policy In Developing Country Cities: Evidence From The Mumbai Mills Redevelopment.
Speaker(s) Dr. Michael Gechter, Assistant Professor, Economics, The Pennsylvania State University, USA Publication Reserve Bank of India, CAFRAL, Mezzanine floor, Main Building, Shahid Bhagat Singh road, Fort, Mumbai 400001

Land policy in developing country cities places significant restrictions on formal sector developers but often fails to reign in informal development. To what extent does this pattern reduce city efficiency, and how are the effects shared between the rich and poor? We address these questions in three steps. First, we exploit a unique natural experiment in Mumbai 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, we 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, we develop a quantitative general equilibrium model of a city featuring formal and informal housing supply to guide our empirical analysis. We document a large increase in the supply of formal construction on mill sites, and find substantial spillovers on nearby locations that led slums to redevelop into formal housing. Our findings suggest that land policy can reduce the efficiency of developing country cities by misallocating land away from its optimal use, but policies that promote formal housing supply may have unintended consequences for equity by reducing the stock of relatively affordable housing in slums.