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The Agglomeration of Urban Amenities: Evidence from Milan Restaurants

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  • Marco Leonardi
  • Enrico Moretti

Abstract

We estimate agglomeration externalities in Milan's restaurant sector using the abolition of a unique regulation that restricted where restaurants could locate. In 2005, Milan abolished a minimum distance requirement that had kept the number of establishments artificially constant across neighborhoods. We find that after 2005, the geographical concentration of restaurants increased sharply and at an accelerating rate. Consistent with the existence of strong and self-sustaining agglomeration externalities, restaurants agglomerated in some neighborhoods and deserted others, leading to a growing divergence in local amenities across neighborhoods. Restaurants located in neighborhoods that experienced large increases in agglomeration reacted by increasing product differentiation.

Suggested Citation

  • Marco Leonardi & Enrico Moretti, 2023. "The Agglomeration of Urban Amenities: Evidence from Milan Restaurants," American Economic Review: Insights, American Economic Association, vol. 5(2), pages 141-157, June.
    • Handle: RePEc:aea:aerins:v:5:y:2023:i:2:p:141-57
    DOI: 10.1257/aeri.20220011
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    Cited by:

    1. Cheshire, Paul & Hilber, Christian A. L. & Montebruno Bondi, Piero & Sanchis-Guarner, Rosa, 2022. "(In)convenient stores? What do policies pushing stores to town centres actually do?," LSE Research Online Documents on Economics 118055, London School of Economics and Political Science, LSE Library.
    2. Frederic Kluser, Tobias Seidel, Maximilian v. Ehrlich, 2022. "Spatial frictions in consumption and retail competition," Diskussionsschriften credresearchpaper40, Universitaet Bern, Departement Volkswirtschaft - CRED.
    3. Daiji Kawaguchi & Keisuke Kawata & Chigusa Okamoto, 2024. "Urban Redevelopment Program and Demand Externality," CIRJE F-Series CIRJE-F-1227, CIRJE, Faculty of Economics, University of Tokyo.
    4. Kim, Yanghee & Lee, Minwoo & Kim, Byung-Do & Roh, Taewoo, 2024. "Power of agglomeration on electronic word–of–mouth in the restaurant industry: Exploring the moderation role of review quality difference," Journal of Retailing and Consumer Services, Elsevier, vol. 78(C).
    5. Kawaguchi, Daiji & Kawata, Keisuke & Okamoto, Chigusa, 2024. "Urban Redevelopment Program and Demand Externality," IZA Discussion Papers 16925, Institute of Labor Economics (IZA).

    More about this item

    JEL classification:

    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism
    • L88 - Industrial Organization - - Industry Studies: Services - - - Government Policy
    • R32 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Other Spatial Production and Pricing Analysis
    • R52 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Land Use and Other Regulations

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