Trade, Commuting and City Structure

Cities are places where people commute to work and where goods are traded across space. While a large literature examines how lower commuting costs reshape cities, much less is known about within-city trade costs as a distinct force. This paper studies both channels using the construction of the Petite Ceinture railroad in nineteenth-century Paris, the world's first circular transit system, designed for both freight and passengers. Using newly digitized data on firms, population, rents, and transport networks spanning 1801 to 1906, I provide causal evidence that improved access to the railroad reshaped the spatial distribution of economic activities during this period. To quantify general equilibrium effects, I develop and calibrate a quantitative urban model in which within-city freight costs generate spatial variation in tradable goods prices, creating consumption-driven forces at the residence absent from canonical models. Counterfactuals show that removing the railroad would substantially reduce total population, consumption of tradables, and spatial specialization. Ignoring within-city freight costs leads to a 17.1% underestimation of the effects of transport infrastructure on urban structure and welfare.