Better cost-benefit analysis methods may change the ranking of possible housing sector interventions
This study on slum upgrading developed a dynamic general equilibrium model to compare the effectiveness of alternative slum upgrading instruments in an urban setting with distortions in the land and credit markets. Using data from three Brazilian cities, the analysis indicates that pre-existing land supply and credit market distortions reduce the benefits of interventions, and change the rank ordering of preferred interventions. The results suggests that partial equilibrium analysis used in typical cost-benefit work overstates the stream of net benefits from upgrading interventions and may lead to a less desirable sequence of interventions.
"Assessing benefits of slum upgrading programs in second best settings, " Basap Dasgupta and Lall, Somik V. Lall, in Lall et al, eds., Urban Land Markets, Improving Land Management for Successful Urbanization, Springer, 2009. (Based on World Bank Policy Research Working Paper 3993.)