Regulation and informality: effects of land plan regulations on the proliferation of informal settlements

The effect of regulation on the proliferation of informal settlements is unclear. While stricter regulations can provide policy makers with tools for control them (welfare economic approach), they can also constitute a form of exclusion that forces many segments of the population to choose the informal market (exclusionary purpose). Based on an event study and a spatial regression discontinuity, we try to elucidate the effect of different types of regulation on the proliferation of informal settlements. Preliminary results show that the prevalent approach is the exclusionary one and that laxer regulations decrease the proliferation of informal settlements. The welfare effect is yet not clear.