Firms, fires, and firebreaks: The impact of the 1906 San Francisco disaster on business agglomeration

Abstract

Is the spatial distribution of urban business establishments sensitive to large, temporary shocks? This paper studies the impact of the 1906 San Francisco earthquake and fire on the agglomeration of 71 industries in the city. The disaster reset location patterns as firms moved after the destruction of thousands of buildings. Using addresses gathered from city business directories between 1900 and 1930, this study asks whether industry agglomeration in San Francisco was permanently affected by the shock. While firms had dispersed after the disaster, industries largely recovered their previous clustering patterns by 1915. The distribution of firms across city blocks, however, was susceptible to the shock as many industries—particularly in manufacturing—had permanently relocated in the wake of the disaster. Industry clustering is thus resilient to shocks, even if ties to certain areas of a city are not. Together, these outcomes suggest that agglomeration economies and other dynamic forces, more than fixed local characteristics, determine firm locations at a microscale.