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Faculty of Economics

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Brotherhood, L., Cavalcanti, T., Da Mata, D. and Santos, C.

Slums and Pandemics

CWPE2076

Abstract: This paper studies the role of slums in shaping the economic and health dynamics of pandemics. Using data from millions of mobile phones in Brazil, an event-study analysis shows that residents of overcrowded slums engaged in less social distancing after the outbreak of Covid-19. We develop a choice-theoretic equilibrium model in which poorer agents live in high-density slums and others do not. The model is calibrated to Rio de Janeiro. Slum dwellers account for a disproportionately high number of infections and deaths. In a counterfactual scenario without slums, deaths increase in non-slum neighborhoods. Policy simulations indicate that: reallocating medical resources cuts deaths and raises output and the welfare of both groups; mild lockdowns favor slum individuals by mitigating the demand for hospital beds whereas strict confinements mostly delay the evolution of the pandemic; and cash transfers benefit slum residents in detriment of others, highlighting important distributional effects.

Keywords: Covid-19, slums, health, social distancing, public policies

JEL Codes: E17 I10 I18 D62 O18 C63

Author links: Tiago Cavalcanti  

PDF: http://www.econ.cam.ac.uk/research-files/repec/cam/pdf/cwpe2076.pdf