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The billion pound drop: the blitz and agglomeration economies in London

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  • Gerard H. Dericks
  • Hans R. A. Koster

Abstract

This paper exploits locally exogenous variation in the location of bombs dropped during the Blitz to quantify the effect of density restrictions on agglomeration economies in London: an elite global city. Employing microgeographic data on office rents and employment, this analysis points to effects for London several multiples larger than the existing literature which primarily derives its results from secondary cities. In particular, doubling employment density raises rents by 25%. Consequently if the Blitz had not taken place, the resulting loss in agglomeration economies to present day London would cause total annual office rent revenues to fall by $4:5 billion { equivalent to 1:2% of London's annual GDP. These results illuminate the substantial impact of land-use regulations in one of the world's largest and most productive cities.

Suggested Citation

  • Gerard H. Dericks & Hans R. A. Koster, 2018. "The billion pound drop: the blitz and agglomeration economies in London," CEP Discussion Papers dp1542, Centre for Economic Performance, LSE.
  • Handle: RePEc:cep:cepdps:dp1542
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    4. Yamasaki, Junichi & Nakajima, Kentaro & Teshima, Kensuke, 2021. "From Samurai to Skyscrapers: How Historical Lot Fragmentation Shapes Tokyo," TDB-CAREE Discussion Paper Series E-2020-02, Teikoku Databank Center for Advanced Empirical Research on Enterprise and Economy, Graduate School of Economics, Hitotsubashi University.

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    More about this item

    Keywords

    regulatory costs; office rents; agglomeration economies; London Blitz bombings;
    All these keywords.

    JEL classification:

    • R14 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Land Use Patterns
    • R33 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Nonagricultural and Nonresidential Real Estate Markets
    • R38 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Government Policy

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