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The Economics of Density: Evidence from the Berlin Wall

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  • Gabriel M. Ahlfeldt
  • Stephen J. Redding
  • Daniel M. Sturm
  • Nikolaus Wolf

Abstract

This paper develops a quantitative model of city structure to separate agglomeration forces, dispersion forces and fundamentals as determinants of location choices. The model remains tractable and amenable to empirical analysis because of stochastic shocks to worker productivity, which yield a gravity equation for commuting flows. To empirically disentangle alternative determinants of location choices, we use Berlin's division and reunification as a source of exogenous variation in the surrounding concentration of economic activity. Using disaggregated data on land prices, workplace employment and residence employment for thousands of city blocks for 1936, 1986 and 2006, we find that the model can account both qualitatively and quantitatively for the observed changes in city structure.

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Bibliographic Info

Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp1154.

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Date of creation: Jun 2012
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Handle: RePEc:cep:cepdps:dp1154

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Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP

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Keywords: agglomeration; dispersion; density; cities;

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  1. Edward L. Glaeser & Jed Kolko & Albert Saiz, 2000. "Consumer City," Harvard Institute of Economic Research Working Papers 1901, Harvard - Institute of Economic Research.
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  3. Nathaniel Baum-Snow & Ronni Pavan, 2010. "Understanding the city size wage gap," Working Papers 2010/27, Institut d'Economia de Barcelona (IEB).
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  14. Nathaniel Baum-Snow, 2007. "Did Highways Cause Suburbanization?," The Quarterly Journal of Economics, MIT Press, vol. 122(2), pages 775-805, 05.
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  17. Roback, Jennifer, 1982. "Wages, Rents, and the Quality of Life," Journal of Political Economy, University of Chicago Press, vol. 90(6), pages 1257-78, December.
  18. Fujita, Masahisa & Krugman, Paul, 1995. "When is the economy monocentric?: von Thunen and Chamberlin unified," Regional Science and Urban Economics, Elsevier, vol. 25(4), pages 505-528, August.
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  21. repec:bla:restud:v:75:y:2008:i:4:p:1011-1038 is not listed on IDEAS
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