DP13170 The Making of the Modern Metropolis: Evidence from London

Author(s): Stephan Heblich, Stephen J. Redding, Daniel M Sturm
Publication Date: September 2018
Keyword(s): agglomeration, Transportation, Urbanization
JEL(s): O18, R12, R40
Programme Areas: International Trade and Regional Economics
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=13170

Modern metropolitan areas involve large concentrations of economic activity and the transport of millions of people each day between their residence and workplace. We use the revolution in transport technology from the invention of steam railways, newly-constructed spatially-disaggregated data for London from 1801-1921, and a quantitative urban model to provide evidence on the role of these commuting flows in supporting such concentrations of economic activity. Steam railways dramatically reduced travel times and permitted the first large-scale separation of workplace and residence. We show that our model is able to account for the observed changes in the organization of economic activity, both qualitatively and quantitatively. In counterfactuals, we find that removing the entire railway network reduces the population and the value of land and buildings in Greater London by 20 percent or more, and brings down commuting into the City of London from more than 370,000 to less than 60,000 workers.