History and Industry Location: Evidence from German Airports
Abstract
A central prediction of a large class of theoretical models is that industry location is not necessarily uniquely determined by fundamentals. In these models, historical accident or expectations determine which of several steady-state locations is selected. Despite the theoretical prominence of these ideas, there is surprisingly little systematic evidence on their empirical relevance. This paper exploits the combination of the division of Germany after the Second World War and the reunification of East and West Germany as an exogenous shock to industry location. We focus on a particular economic activity and establish that division caused a shift of Germany's air hub from Berlin to Frankfurt and there is no evidence of a return of the air hub to Berlin after reunification. We develop a body of evidence that the relocation of the air hub is not driven by a change in economic fundamentals but is instead a shift between multiple steady-states.Download Info
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Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0809.Length:
Date of creation: Jul 2007
Date of revision:
Handle: RePEc:cep:cepdps:dp0809
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Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP
Related research
Keywords: Industry Location; Economic Geography; German Division; German Reunification;Other versions of this item:
- Stephen J. Redding & Daniel M. Sturm & Nikolaus Wolf, 2011. "History and Industry Location: Evidence from German Airports," The Review of Economics and Statistics, MIT Press, vol. 93(3), pages 814-831, August.
- Redding, Stephen J & Sturm, Daniel M & Wolf, Nikolaus, 2007. "History and Industry Location: Evidence from German Airports," CEPR Discussion Papers 6345, C.E.P.R. Discussion Papers.
- F14 - International Economics - - Trade - - - Empirical Studies of Trade
- F15 - International Economics - - Trade - - - Economic Integration
- N74 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services - - - Europe: 1913-
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-12-15 (All new papers)
- NEP-HIS-2007-12-15 (Business, Economic & Financial History)
- NEP-URE-2007-12-15 (Urban & Real Estate Economics)
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