Abstract: Do central slums provide essential economic and social benefits to the poor? We collected bespoke data for 5,000 households to study mass forced clearances in Addis Ababa. Evictees were offered alternative subsidized housing further from the center. Exploiting sharp clearance zone boundaries, regression-discontinuity estimates show negative impacts on social networks, but positive impacts on work, earnings, housing quality and environmental amenity. Relocating households close to their ex-ante neighbors eliminates social costs. Slums are not essential: relocation policies can be designed to fully compensate residents, and the sale value of cleared land more than covers the cost.

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Abstract: We develop a quantitative general-equilibrium framework for the normative evaluation of minimum wages in spatial economies with monopsonistic labour markets. We quantify the model for German micro-regions and successfully over-identify its predictions against the effects of the 2015 German minimum wage observed in data. Simulating the model, we find that at low levels, spatially blind national minimum wages can increase welfare and spatial equity simultaneously. At higher levels, however, welfare gains are traded against employment losses and spatial inequality. Because regional minimum wages are not spatially blind, they can increase employment and welfare in a spatially neutral manner.