The Socioeconomic Impact of COVID-19 in Urban Informal Settlements

The COVID-19 pandemic has reached almost every corner of the world. Without a pharmaceutical solution, governments have been forced to implement regulations and public policies to control social behavior and prevent the spread of the virus. There is dramatic evidence of the social and economic effects of these measures and their disparate impact on vulnerable communities. Individuals living in urban informal settlements are in a structurally disadvantaged position to cope with a health crisis such as the COVID-19 pandemic. This paper examines the socioeconomic impact of the crisis brought by the pandemic in informal settlements in Chile. We use a three-wave panel study to compare the situation in informal settlements before and during the health crisis. We show that households living in informal settlements are paying a high toll. Their employment loss is dramatic, substantially larger than the loss reported in the general population, and has particularly affected the inmigrant population. We also find that the pandemic has triggered neighborhood cooperation within the settlements. Targeted government assistance programs have reached these communities; however, this group’s coverage is not enough to counteract the magnitude of the crisis. Our results suggest that governments, the non-profit sector, and the community need to urgently provide economic support and protections to individuals living in informal settlements and consider this opportunity for long-term improvements in these marginalized communities.HighlightsGovernments have implemented large-scale non-pharmaceutical interventions to control the spread of the COVID-19 pandemicThese measures have had dramatic social and economic effects on the population, particularly affecting vulnerable communitiesIndividuals living in urban informal settlements are in a structurally disadvantaged position to cope with this crisisUsing panel data, we document a dramatic employment loss among informal settlements dwellers, substantially larger than the general populationThe pandemic has also triggered neighborhood cooperation within the settlements as well as targeted government assistance, but not enough to counteract the magnitude of the economic loss