Working Paper
The Face of Urban Poverty

Explaining the Prevalence of Slums in Developing Countries

One of the most visible and enduring manifestations of urban poverty in developing countries is the formation and proliferation of slums. While attention has focused on the rapid pace of urbanization as the sole or major factor explaining the proliferation of slums and squatter settlements in developing countries, there are other factors whose impacts are not known with much degree of certainty. It is also not clear how the effects of these factors vary across regions of the developing world. This paper accounts for differences in the prevalence of slums among developing countries using data drawn from the recent global assessment of slums undertaken by the United Nations Human Settlements Programme. The empirical analysis identifies substantial inter-country variations in the incidence of slums both within and across the regions of Africa, Asia as well as, Latin America and the Caribbean. Further analysis indicates that higher GDP per capita, greater financial depth and increased investment in infrastructure will reduce the incidence of slums. Conversely, the external debt burden, inequality in the distribution of income, rapid urban growth and the exclusionary nature of the regulatory framework governing the provision planned residential land contribute positively to the prevalence of slums and squatter settlements.