Mariaflavia Harari on Slum Upgrading and Urban Development Outcomes

Dr. Mariaflavia (Nina) Harari is an Associate Professor of Real Estate and the Leonard J. Horwitz Faculty Scholar at The Wharton School, University of Pennsylvania.

Dr. Mariaflavia (Nina) Harari’s scholarship explores the intersection of urban economics, international development, and real estate, focusing on how institutions, land markets, and infrastructure shape the evolution of cities in emerging economies. Her research examines how policies, property rights, and spatial constraints influence urban form, housing supply, and economic opportunity—particularly in rapidly urbanizing regions of the Global South.

A central theme of Dr. Harari’s work is the role of land institutions and informality in shaping urban development. Urban growth in developing countries is often characterized by fragmented land ownership, weak property rights, and the coexistence of formal and informal housing markets. Dr. Harari’s research uses detailed spatial data, historical records, and innovative empirical methods to assess how these conditions affect land allocation and the long-run growth of cities. Her work highlights how policy interventions—often designed to improve living conditions in the short term—can have lasting consequences for urban density, redevelopment, and structural inequality.

In “Slum Upgrading and Long-run Urban Development: Evidence from Indonesia,” co-authored with Dr. Maisy Wong and forthcoming in the Review of Economic Studies, Dr. Harari examines the long-term impacts of one of the world’s largest slum upgrading initiatives: Indonesia’s Kampung Improvement Program (KIP). Implemented between 1969 and 1984 in Jakarta, the program provided infrastructure improvements, including paved roads, drainage, sanitation, and community facilities to informal settlements while allowing residents to remain in place. The program ultimately reached millions of residents and covered roughly a quarter of the city’s land area.

Slum upgrading programs like KIP are widely used in developing countries because they aim to improve living conditions without displacing low-income residents. However, they also raise an important question for urban development: Do these programs facilitate long-run urban growth, or do they make informal settlements more permanent in locations where redevelopment might otherwise occur?

Dr. Harari and Dr. Wong address this question by assembling a novel dataset that combines historical policy maps with modern spatial data on land values, building heights, cadastral records, and measures of neighborhood informality derived from photographic surveys. Their findings show that upgraded neighborhoods continue to differ significantly from other areas of the city. While the program improved basic infrastructure and living conditions, upgraded areas today have lower land values and less intensive development, with fewer tall buildings and lower building density compared to similar neighborhoods that were not upgraded. These patterns suggest that the program helped stabilize informal neighborhoods but also slowed their transition into formal, higher-density urban development.

This highlights an important policy tradeoff between short-run benefits to informal residents and long-run opportunity costs of delayed formalization for the city as a whole. Dr. Harari and Dr. Wong’s analysis reveals that these costs are concentrated in the center of Jakarta, whereas slum upgrading offers a more attractive cost-benefit balance in other parts of the city.

The study contributes to a growing body of empirical evidence on how to enhance urban development for the long-run growth of rapidly urbanizing cities in emerging economies.

“Developing countries are expected to undergo massive urban expansion to accommodate two billion more people by 2050 (UN-Habitat, 2022). Central to this transformation is the allocation of land, an increasingly scarce resource. This process is complicated by weak property rights and the ensuing politically-charged debate around clearing and redeveloping slums, which host one billion people globally (United Nations, 2020). Yet, there is limited quantitative evidence due to a lack of data and endogeneity challenges associated with studying slums (Field and Kremer, 2008).”

“The 1969–1984 Kampung Improvement Program (KIP) provided basic public goods and a verbal non-eviction guarantee to 5 million slum dwellers in the city of Jakarta, Indonesia. Upgrades can be a cost-effective way to improve the well-being of many residents without displacing them. However, policymakers are concerned that upgrading can make slums persist longer than they otherwise would. This can entail significant opportunity costs, especially as cities expand and slums occupy centrally located land (Henderson et al., 2020)... On average, KIP areas have lower land values in 2015, shorter buildings and are more informal. The negative effects are largest within 5km of the CBD. We develop a spatial equilibrium model to quantitatively assess the role of slum upgrading in influencing spatial misallocation of land, finding that 79% of the welfare gains from removing KIP are associated with land close to the CBD. Elsewhere, removing KIP has minimal welfare implications.”””

“Preserving slums is one of the inherent objectives of slum upgrading programs, as these areas give shelter to many residents. This occurs through a number of potential channels. First, higher land values from the upgrades will increase redevelopment costs. Moreover, upgrades and non-eviction guarantees can make slums more attractive and strengthen residents’ perceptions of their occupancy rights (Fox, 2014). This encourages them to stay, plausibly leading to greater population density and more fragmented land (as stayers sub-divide land parcels) over time. In turn, this can increase relocation and land assembly costs.”

“This paper deepens our understanding of slum upgrading and the spatial misallocation of land. Our first contribution is to provide long-term causal impacts of KIP, as modern Jakarta grows out of informality. Second, we combine administrative data and an innovative photographic survey of formal and informal housing markets. While KIP planners targeted slums in worse conditions in the 1960s, we address program selection bias using credible research designs. Third, we integrate our reduced-form estimates with a spatial equilibrium model to characterize the welfare implications of slum upgrading, highlighting that the opportunity costs from upgrading and preserving slums are concentrated in central areas.”