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History and Industry Location: Evidence from German Airports

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Author Info
Stephen Redding
Daniel M. Sturm
Nikolaus Wolf

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Abstract

A central prediction of a large class of theoretical models is that industry location is not necessarilyuniquely determined by fundamentals. In these models, historical accident or expectations determinewhich 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 thecombination of the division of Germany after the Second World War and the reunification of East andWest Germany as an exogenous shock to industry location. We focus on a particular economicactivity and establish that division caused a shift of Germany's air hub from Berlin to Frankfurt andthere is no evidence of a return of the air hub to Berlin after reunification. We develop a body ofevidence that the relocation of the air hub is not driven by a change in economic fundamentals but isinstead a shift between multiple steady-states.

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Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0809.

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Date of creation: Jul 2007
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Handle: RePEc:cep:cepdps:dp0809

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Related research
Keywords: Industry Location; Economic Geography; German Division; German Reunification;

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Find related papers by JEL classification:
F14 - International Economics - - Trade - - - Country and Industry 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-

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References listed on IDEAS
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Volker Nitsch, 2009. "Fly or Cry: Is Airport Noise Costly?," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  2. Gabriel Ahlfeldt, 2007. "If Alonso Was Right: Accessibility as Determinant for Attractiveness of Urban Location," Working Papers 012, Chair for Economic Policy, University of Hamburg. [Downloadable!]
  3. Ahlfeldt, Gabriel M. & Wendlan, Nicolai, 2008. "Spatial Determinants of CBD Emergence: A Micro-level Case Study on Berlin∗," MPRA Paper 11572, University Library of Munich, Germany. [Downloadable!]
  4. Stephen Redding, 2009. "The Empirics of New Economic Geography," CEP Discussion Papers dp0925, Centre for Economic Performance, LSE. [Downloadable!]
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  5. Rainald Borck & Hyun-Ju Koh & Michael Pflüger, 2009. "Inefficient Lock-in and Subsidy Competition," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
    Other versions:
  6. Stephen Redding, 2009. "Economic Geography: A Review of the Theoretical and Empirical Literature," CEP Discussion Papers dp0904, Centre for Economic Performance, LSE. [Downloadable!]
    Other versions:
  7. Nathan Nunn, 2009. "The Importance of History for Economic Development," NBER Working Papers 14899, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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