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The billion pound drop: the blitz and agglomeration economics in London

Dericks, Gerard and Koster, Hans R. A. (2018) The billion pound drop: the blitz and agglomeration economics in London. CEP Discussion Papers (CEPDP1542). Centre for Economic Performance, London School of Economics and Political Science, London, UK.

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Abstract

This paper exploits locally exogenous variation in the location of bombs dropped during the Blitz to quantify the effect of density restrictions on agglomeration economies in London: an elite global city. Employing microgeographic data on office rents and employment, this analysis points to effects for London several multiples larger than the existing literature which primarily derives its results from secondary cities. In particular, doubling employment density raises rents by 25%. Consequently if the Blitz had not taken place, the resulting loss in agglomeration economies to present day London would cause total annual office rent revenues to fall by $4:5 billion {equivalent to 1:2% of London's annual GDP. These results illuminate the substantial impact of land-use regulations in one of the world's largest and most productive cities.

Item Type: Monograph (Discussion Paper)
Official URL: http://cep.lse.ac.uk/
Additional Information: © 2018 The Authors
Divisions: Centre for Economic Performance
Subjects: H Social Sciences > HB Economic Theory
JEL classification: R - Urban, Rural, and Regional Economics > R1 - General Regional Economics > R14 - Land Use Patterns
R - Urban, Rural, and Regional Economics > R3 - Production Analysis and Firm Location > R33 - Nonagricultural and Nonresidential Real Estate Markets
R - Urban, Rural, and Regional Economics > R3 - Production Analysis and Firm Location > R38 - Government Policies; Regulatory Policies
Sets: Research centres and groups > Centre for Economic Performance (CEP)
Date Deposited: 26 Jun 2018 15:58
Last Modified: 18 Oct 2019 23:26
Funders: Economic and Social Research Council
URI: http://eprints.lse.ac.uk/id/eprint/88694

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