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The Economics of Density: Evidence from the Berlin Wall

  • Sturm, Daniel
  • Ahlfeldt, Gabriel
  • Redding, Stephen
  • Wolf, Nikolaus

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 ows. To empirically disentangle alternative determinants of location choices, we use Berlin s division and reuni cation 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 nd that the model can account both qualitatively and quantitatively for the observed changes in city structure.

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Paper provided by Verein für Socialpolitik / German Economic Association in its series Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order with number 79873.

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Date of creation: 2013
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Handle: RePEc:zbw:vfsc13:79873
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