DP15470 Prime locations

Author(s): Gabriel Ahlfeldt, Thilo Albers, Kristian Behrens
Publication Date: November 2020
Keyword(s): agent-based model, internal city structure, multiple equilibria and path dependence, Prime services, transport networks
JEL(s): R38, R52, R58
Programme Areas: International Trade and Regional Economics, Economic History
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=15470

We harness big data to detect prime locations---large clusters of know-ledge-based tradable services---in 125 global cities and track changes in the within-city geography of prime service jobs over a century. Historically smaller cities that did not develop early public transit networks are less concentrated today and have prime locations farther away from their historic cores. We rationalize these findings in an agent-based model that features extreme agglomeration, multiple equilibria, and path dependence. Both city size and public transit networks anchor city structure. Exploiting major disasters and using a novel instrument---subway potential---we provide causal evidence for these mechanisms and disentangle size- from transport network effects.