DP15131 Slums and Pandemics
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 fall overall but 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.