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The Price of Productivity

Author

Listed:
  • Gabriel Ahlfeldt

    (HU Berlin)

  • Stephan Heblich

    (University of Toronto)

  • Tobias Seidel

    (University of Duisburg-Essen)

  • Fan Yin

    (HU Berlin, Berlin School of Economics)

Abstract

We construct a new micro-geographic commercial rent index for Germany to study the capitalization of agglomeration economies into floor space prices. In large local labor markets, commercial rents decline by -17% per kilometer from the central business district, compared to 13% for residential rents, reflecting stronger agglomeration benefits at the center. Commercial rents in central business districts increase with local labor market size at an elasticity of 15%, implying that wage responses capture only about half of the agglomeration effect on total factor productivity.

Suggested Citation

  • Gabriel Ahlfeldt & Stephan Heblich & Tobias Seidel & Fan Yin, 2026. "The Price of Productivity," Rationality and Competition Discussion Paper Series 563, CRC TRR 190 Rationality and Competition.
    • Handle: RePEc:rco:dpaper:563
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    Keywords

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    JEL classification:

    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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