Speakers: Stephen J. Redding, Princeton University and CEPR
(joint with Gabriel M. Ahlfeldt, LSE, Daniel M. Sturm, LSE and CEPR, Nikolaus Wolf, Warwick University and CEPR)
Abstract: In explaining the uneven distribution of economic activity, a key empirical challenge is separating agglomeration and dispersion forces from natural advantages and amenities. This paper uses the division and reuni…fication of Berlin as a natural experiment to provide new evidence on the strength of agglomeration and dispersion forces. We develop a quantitative model of city structure that allows for variation in natural advantages, amenities and transport infrastructure. We use disaggregated data on land rents, workplace employment and residence employment to determine the model’s parameters and show that it can account both qualitatively and quantitatively for the observed changes in city structure.