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The Economics of Density: Evidence from the Berlin Wall

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

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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File URL: http://www.spatialeconomics.ac.uk/textonly/SERC/publications/download/sercdp0118.pdf
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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
Contact details of provider: Web page: http://www.spatialeconomics.ac.uk/SERC/publications/default.asp

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  1. Robert E. Hall & Charles I. Jones, 1996. "The Productivity of Nations," NBER Working Papers 5812, National Bureau of Economic Research, Inc.
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  9. J. Vernon Henderson & Mohammad Arzaghi, 2005. "Networking Off Madison Avenue," Working Papers 05-15, Center for Economic Studies, U.S. Census Bureau.
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  15. Stephen Redding & Daniel Sturm, 2006. "The Costs of Remoteness: Evidence from German Division and Reunification," 2006 Meeting Papers 283, Society for Economic Dynamics.
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  20. repec:bla:restud:v:75:y:2008:i:4:p:1011-1038 is not listed on IDEAS
  21. McArthur, David Philip & Kleppe, Gisle & Thorsen, Inge & Ubøe, Jan, 2010. "The spatial transferability of parameters in a gravity model of commuting flows," Discussion Papers 2010/3, Department of Business and Management Science, Norwegian School of Economics.
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  29. James E. Rauch, 1991. "Productivity Gains From Geographic Concentration of human Capital: Evidence From the Cities," NBER Working Papers 3905, National Bureau of Economic Research, Inc.
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