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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 Spatial Economics Research Centre, LSE in its series SERC Discussion Papers with number 0118.

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Date of creation: Sep 2012
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Handle: RePEc:cep:sercdp:0118

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Web page: http://www.spatialeconomics.ac.uk/SERC/publications/default.asp

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Keywords: Agglomeration; dispersion; density; cities;

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  20. repec:bla:restud:v:75:y:2008:i:4:p:1011-1038 is not listed on IDEAS
  21. Dekle, Robert & Eaton, Jonathan, 1999. "Agglomeration and Land Rents: Evidence from the Prefectures," Journal of Urban Economics, Elsevier, vol. 46(2), pages 200-214, September.
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