Journal Of The Econometric Society

An International Society for the Advancement of Economic
Theory in its Relation to Statistics and Mathematics

Edited by: Guido W. Imbens • Print ISSN: 0012-9682 • Online ISSN: 1468-0262

Econometrica: Nov, 2015, Volume 83, Issue 6

The Economics of Density: Evidence from the Berlin Wall
p. 2127-2189

Gabriel M. Ahlfeldt, Stephen J. Redding, Daniel M. Sturm, Nikolaus Wolf

This paper develops a quantitative model of internal city structure that features agglomeration and dispersion forces and an arbitrary number of heterogeneous city blocks. The model remains tractable and amenable to empirical analysis because of stochastic shocks to commuting decisions, which yield a gravity equation for commuting flows. To structurally estimate agglomeration and dispersion forces, we use data on thousands of city blocks in Berlin for 1936, 1986, and 2006 and exogenous variation from the city's division and reunification. We estimate substantial and highly localized production and residential externalities. We show that the model with the estimated agglomeration parameters can account both qualitatively and quantitatively for the observed changes in city structure. We show how our quantitative framework can be used to undertake counterfactuals for changes in the organization of economic activity within cities in response, for example, to changes in the transport network.

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Supplemental Material

Supplement to "The Economics of Density: Evidence from the Berlin Wall"

This zip file contains the replication files for the manuscript and a separate technical data appendix collecting together additional empirical results and robustness

Supplement to "The Economics of Density: Evidence from the Berlin Wall"

This supplement contains detailed derivations and supplementary material for the paper.

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