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Abstract for:

The Economics of Density: Evidence from the Berlin Wall

Gabriel M.  Ahlfeldt,  Stephen J.  Redding,  Daniel M.  Sturm,  Nikolaus  Wolf,  September 2012
Paper No' SERCDP0118: | Full paper (pdf)
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Keywords: Agglomeration; dispersion, density, cities

JEL Classification: N34; O18; R12

Is hard copy/paper copy available? YES - Paper Copy Still In Print.
This Paper is published under the following series: SERC Discussion Papers
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Abstract:

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.