A second line of literature our work is aligned with is that on spatial mismatch. Originally developed by Kain (1968) for the racial segregation context in the United States, the spatial mismatch literature argues that unskilled workers who are segregated away from job opportunities tend to be unemployed and have lower wages due to high commuting and job search costs (see a review by Gobillon and Selod 2014). This is relevant to African cities as well. In fact, a randomized control trial (RCT) recently conducted in Addis Ababa, Ethiopia, finds that providing a transport subsidy to disadvantaged job seekers increased their chance of finding better jobs (Abebe et al. 2017; Franklin forthcoming). Analyzing such causal impacts of job accessibility on labor market outcomes must follow detailed assessments of job accessibility for disadvantaged workers. Our study aims to provide such diagnostics of job accessibility among Nairobi residents by paying specific attention to informal settlements.

Finally, our research is related to the literature on hedonic regression analysis for housing prices. Urban land use theory (Alonso 1964; Mills and Hamilton 1995; Muth 1968) explains how the rent gradient over distance from the central business district (CBD) is determined in a monocentric city. In reality, however, jobs are not necessarily concentrated in the CBD. We add to the hedonic regression literature by estimating the link between job accessibility and housing rents, by explicitly including housing in informal residential areas. A few studies have estimated hedonic regression for informal housing in the developing world, such as Gulyani, Bassett, and Talukdar (2012) and Marx, Stoker, and Suri (2017) for Nairobi and Nakamura (2017) for Pune, India. Another recent study by Atuesta et al. (2018) found a clear link between job accessibility and housing values in Mexico City.

The rest of this paper is structured as follows: Section 2 describes the context about job accessibility challenges in Nairobi. Section 3 discusses the methodology by explaining various data sets and analytical methods employed in this study. Section 4 presents the results on the job accessibility calculated for the city, the levels of job accessibility by different household groups, and hedonic regressions. Section 5 concludes with a brief summary of findings.

# **2. Context: Spatial challenges in Nairobi**

Recently collected surveys help to grasp spatial challenges in Nairobi. Most Nairobi residents are rent-paying tenants, and low-cost rental units are mainly located in informal residential areas. According to the Cities Baseline Survey (explained in Section 3), the distribution of housing rents in Nairobi is skewed with a small group of very high rents (Panels A and B in Figure 1). The average housing rent among the surveyed rental units is K Sh 5,315.<sup>3, 4</sup> A quarter of rental units have a rent of lower than K Sh 1,800; half the rental units have rents less than K Sh 2,500; and 75 percent of rental units have rents less than K Sh 4,400. About 10 percent of units have very high rents (more than K Sh 30,000). The mean rent value in informal settlements (K Sh 3,600) is less than half of that in formal residential areas (K Sh 9,000), and the majority of cheap rental units (less than K Sh 2,500) in the city are located in informal residential areas.

3 The housing rents used in this study include utilities. 4 K Sh 5,315 was roughly equivalent to US$61 as of 2013.

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