There Is No Free House: Ethnic Patronage and Property Rights in a Kenyan Slum

We show that ethnic patronage and weak property rights provide an avenue for rent extraction in a Kenyan slum, Kibera. Slum residents pay higher rents for their dwelling, and invest less in housing quality when the landlord and the local chief belong to the same tribe. Conversely, rents are lower, and investments higher, when the household and the chief belong to the same tribe. These effects are partly offset in areas with high youth unemployment, where youth gangs may contribute to enforcing tenancy rights, but they are stronger in areas with arguably weaker property rights. Our identification relies on the exogenous appointment of chiefs governing the area and is supported by several robustness checks, including a regression discontinuity design (RDD). As an additional contribution, we develop novel measures of housing investments using high resolution satellite images of the slum.