Exclusionary policies in urban development: under-servicing migrant households in Brazilian cities

Localities in developed countries often enact regulations to deter low-income households from moving in. In developing countries, such restrictions lead to the emergence of informal housing sectors. To deter low-income migrants, localities in developing countries withhold public services to the informal housing sector. Using a large sample of Brazilian localities, we examine migration and exclusion, focusing on the public provision of water to small houses where low-income migrants are likely to live. Withholding water connections reduces the locality growth rate, particularly of low-education households. In terms of service provision, during dictatorship in Brazil, we find evidence of strategic exclusion, where localities appear to withhold services to deter in-migration. We also find evidence of strategic interactions among localities within metro areas in their setting of service levels: if one locality provides more services to migrant households, other localities respond by withholding service.