rent-seeking behavior of numerous stakeholders in the land sector combine to prevent large fractions of the population from accessing land under secure property rights (Durand-Lasserve et al. 2015). In this context, informal settlements have become a key feature of urbanization in developing countries, reflecting both the low income levels and the institutional weaknesses of these countries. In Sub-Saharan Africa in particular, it is believed that between 60 and 80 percent of the urban population live in informal settlements (UN-Habitat 2010). As informal settlements are very often slums<sup>4</sup> , they may hinder the economic development of cities and exacerbate poverty through a variety of channels including lack of investment in education (Benabou 1993), adverse labor market outcomes (Rospab ́e and Selod 2006), high criminality (Glaeser and Sims 2015), and a negative impact on health (Sclar et al. 2006). The lack of formal land property rights in informal settlements further immobilizes capital that is “locked” and cannot be used for productive activities (de Soto 2000, Safavian et al. 2006).<sup>5</sup> More generally, distorted land markets in cities are a major source of inefficiency that hinder economic activities (Duranton et al. 2015). As a result, some countries (mostly African ones) are urbanizing with insecure land rights and in the absence of economic growth.<sup>6</sup> In view of all the above, the key question raised in our paper is the extent to which the dynamics of urbanization in developing countries will replicate or will diverge from the experience of North America and Western Europe. It is indeed not clear a priori whether the combination of rapid urbanization with distorted property rights systems will affect the timing of urbanization and growth along a path that is comparable to that of industrialized countries, or, on the contrary, if it will set developing economies on a different path of “messy urbanization” with persisting slums and limited long-run economic growth. Projecting the experience of North America and Western Europe onto urbanization in the developing world, there seems to be an implicit consensus among development experts that the first scenario will be happening. In this respect, the “modernization” view of slums sees them as transitory (Marx et al. 2013) and bound to disappear with increases in income as in the case of developed countries: slums, which were quite common in 19th century cities in Europe (Offer 1981), have become almost inexistent in the cities of developed countries. Figure 3 (Panel A) plots the percentage of urban dwellers living in slums on the urbanization rate for a selection of developing countries. In support of this assumption, it shows a negative cross-sectional relation, and thus suggests that the pursuit of urbanization will indeed reduce slums. Similarly, longitudinal data over a short time period (15 years) also indicate a decrease in the prevalence of slums in almost all the countries in the

> 4There is a high correlation between informal settlements and slums. The UN definition of slums includes a high prevalence of households residing under insecure tenure due to weak property rights as one of the possible criteria that determine slums.

> 5De Soto’s intuition that real property rights should enable their holders to use their property as collateral to obtain credit rests on the assumptions that low-income households in slums are credit constrained and that financial institutions would agree to provide mortgage credit to these households and would accept their properties as collateral (Woodruff 2001).

> 6See Fay and Opal (2000) for the seminal paper identifying the puzzle of “urbanization without growth”, and Jedwab (2015) for an explanation based on the resource curse leading to the development of “consumption cities” that do not trigger a virtuous circle of industrialization.

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