Developing countries face massive urbanization and slum upgrading is a popular policy to improve shelter for many. Yet, preserving slums at the expense of formal developments can raise concerns of misallocation of land. We estimate causal, long-term impacts of the 1969-1984 KIP program, which provided basic upgrades to 5 million residents covering 25% of land in Jakarta, Indonesia. We assemble high-resolution data on program boundaries and 2015 outcomes and address program selection bias through localized comparisons. On average, KIP areas today have lower land values, shorter buildings, and are more informal, per a photographs-based slum index. The negative effects are concentrated within 5km of the CBD. We develop a spatial equilibrium model to characterize the welfare implications of KIP. Counterfactuals suggest that 78% of the welfare effects stem from removing KIP in the center and highlight how to mitigate losses to displaced residents.
JEL Classifications: R14, R31, R4.