The economics of density: evidence from the Berlin Wall

Ahlfeldt, Gabriel M., Redding, Stephen, Sturm, Daniel M. and Wolf, Nikolaus (2015) The economics of density: evidence from the Berlin Wall. Econometrica, 83 (6). pp. 2127-2189. ISSN 0012-9682

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Abstract

This paper develops a quantitative model of internal city structure that features agglomeration and dispersion forces and an arbitrary number of heterogeneous city blocks. The model remains tractable and amenable to empirical analysis because of stochastic shocks to commuting decisions, which yield a gravity equation for commuting flows. To structurally estimate agglomeration and dispersion forces, we use data on thousands of city blocks in Berlin for 1936, 1986 and 2006 and exogenous variation from the city’s division and reunification. We estimate substantial and highly localized production and residential externalities. We show that the model with the estimated agglomeration parameters can account both qualitatively and quantitatively for the observed changes in city structure. We show how our quantitative framework can be used to undertake counterfactuals for changes in the organization of economic activity within cities in response for example to changes in the transport network.

Item Type:	Article
Official URL:	http://onlinelibrary.wiley.com/journal/10.1111/(IS...
Additional Information:	© 2015 The Econometric Society
Library of Congress subject classification:	H Social Sciences > HC Economic History and Conditions H Social Sciences > HD Industries. Land use. Labor > HD100 Land Use
Journal of Economic Literature Classification System:	N - Economic History > N3 - Labor and Consumers, Demography, Education, Health, Income, and Wealth > N34 - Economic History: Labor and Consumers, Demography, Education, Health, Income and Wealth: Europe: 1913- O - Economic Development, Technological Change, and Growth > O1 - Economic Development > O18 - Regional, Urban, and Rural Analyses R - Urban, Rural, and Regional Economics > R1 - General Regional Economics > R12 - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade
Sets:	Departments > Geography and Environment Research centres and groups > Spatial Economics Research Centre Collections > Economists Online Research centres and groups > Centre for Economic Performance (CEP)
Project and Funder Information:	Project ID Funder Name Funder ID 263733 European Research Council http://dx.doi.org/10.13039/501100000781 STU 477/1-1; WO 1429/1-1 German Science Foundation UNSPECIFIED UNSPECIFIED Centre for Economic Performance UNSPECIFIED UNSPECIFIED Princeton University http://dx.doi.org/10.13039/100006734
Projects:	263733, STU 477/1-1 and WO 1429/1-1
Funders:	European Research Council, German Science Foundation, Centre for Economic Performance, Princeton University
Date Deposited:	09 Mar 2015 14:16
URL:	http://eprints.lse.ac.uk/61152/

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