Abstract
AbstractUsing newly constructed spatially disaggregated data for London from 1801 to 1921, we show that the invention of the steam railway led to the first large-scale separation of workplace and residence. We show that a class of quantitative urban models is remarkably successful in explaining this reorganization of economic activity. We structurally estimate one of the models in this class and find substantial agglomeration forces in both production and residence. In counterfactuals, we find that removing the whole railway network reduces the population and the value of land and buildings in London by up to 51.5% and 53.3% respectively, and decreases net commuting into the historical center of London by more than 300,000 workers.
Highlights
Modern metropolitan areas include vast concentrations of economic activity, with Greater London and New York City today accounting for around 8.4 and 8.5 million people respectively
We show that our model is able to account both qualitatively and quantitatively for the observed changes in the organization of economic activity within Greater London
As local policy makers are often concerned about broader measures of local economic activity, we evaluate the counterfactual change in aggregate revenue or Gross Domestic Product (GDP), which equals aggregate income
Summary
Modern metropolitan areas include vast concentrations of economic activity, with Greater London and New York City today accounting for around 8.4 and 8.5 million people respectively. We use the mid-19th-century transport revolution from the invention of steam railways, a newlycreated, spatially-disaggregated dataset for Greater London from 1801-1921, and a quantitative urban model to provide new evidence on the contribution of the separation of workplace and residence to agglomeration. Our paper is related to a recent body of research on quantitative spatial models, including Redding and Sturm (2008), Allen and Arkolakis (2014), Ahlfeldt, Redding, Sturm, and Wolf (2015), Redding (2016), Allen, Arkolakis, and Li (2017), Caliendo, Parro, Rossi-Hansberg, and Sarte (2018), Desmet, Nagy, and Rossi-Hansberg (2018), Monte (2018), and Monte, Redding, and Rossi-Hansberg (2018), as reviewed in Redding and Rossi-Hansberg (2017) All of these papers focus on time periods for which modern transportation networks by rail and/or road exist, whereas we exploit the dramatic change in transport technology provided by the steam locomotive. A separate web appendix establishes isomorphisms between a class of urban models and contains the proofs of propositions, supplementary empirical results, and further details on the data
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