Upward trends in the relative proportions of slum residents in developing countries have led to widespread concern regarding the impact of slum residency on health behaviors. Measurement of these impacts requires recognizing that unobservable household characteristics that affect the location decision may also affect health care choices and outcomes. To address the potential for bias, this paper models the location decision and the household's demand for maternal and child health services simultaneously using a flexible, semi-parametric approach. It uses a unique urban data set from Bangladesh that incorporates sophisticated geographical mapping techniques to carefully delineate between slum and non-slum areas at a particular point in time. The results suggest that accounting for the endogenous location decision of a family substantially reduces bias in estimated marginal effects of slum residence on preventive care demand. While community infrastructure variables appear correlated with preventive care demand, the causal effect of the availability of primary health care facilities is indistinguishable from zero when unobserved heterogeneity is taken into account. The findings suggest that improvements in community infrastructure in urban areas of developing countries are a more favorable health policy solution at the margin than the construction of additional health care facilities. © 2013 Elsevier Ltd.
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