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The consequences of financial frictions on urbanization
[Les conséquences des frictions financières sur l'urbanisation]

Author

Listed:
  • David Gomtsyan

    (CERDI - Centre d'Études et de Recherches sur le Développement International - IRD - Institut de Recherche pour le Développement - CNRS - Centre National de la Recherche Scientifique - UCA - Université Clermont Auvergne)

Abstract

Weak financial institutions may affect developing countries due to slowing the much-needed construction process of residential housing. Using novel data collected from Nairobi, I document considerable variation in the construction duration of new residential buildings, with about 40% of buildings started in 2009 still unfinished in 2018. To understand the role of financial development in cities and urbanization, I develop a model with financial frictions in which households construct individual housing units. Quantitative exercises show that improvements in credit provision can substantially speed up the expansion of the housing stock and increase the city's density by enabling the construction of taller buildings.

Suggested Citation

  • David Gomtsyan, 2024. "The consequences of financial frictions on urbanization [Les conséquences des frictions financières sur l'urbanisation]," Post-Print hal-04523748, HAL.
    • Handle: RePEc:hal:journl:hal-04523748
    Note: View the original document on HAL open archive server: https://uca.hal.science/hal-04523748
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    Keywords

    Urban growth; Housing investment; Financial frictions; Croissance urbaine; Investissement résidentiel; Frictions financières;
    All these keywords.

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