Creative Economy and Slum Incidence in Developing Countries: Effect and Channels

ABSTRACT Recent analyses have highlighted the fact that the creative economy promotes the achievement of the Sustainable Development Goals (SDGs) and consequently affects urban structure and dynamics. Previous work primarily provided descriptive analyses and case studies regarding the link between the creative economy and urban poverty. In this context, this paper advances the discussion by examining the effect of the creative economy, measured by the share of creative goods and services exports in GDP, on slum incidence from a macroeconomic perspective. Using a panel of 115 developing countries over the period 2002–2022 based on the Driscoll‐Kraay technique, we support the hypothesis that the creative economy reduces slum incidence. In other words, the socioeconomic benefits of cultural and creative industries (CCIs) contribute to addressing urban planning challenges. These results remain less sensitive to decomposition by type of creative goods, changes in measures of the creative economy, and the additional control variables. Furthermore, these results remain robust when we use estimation techniques that control endogeneity, censoring, and asymmetry. In addition, mediation analysis shows that income inequality and foreign direct investment are the main channels through which the creative economy influences slum prevalence.