KIEL WORKING PAPER The Cost of Remoteness Revisited No. 2070 January 2017 Richard Franke Kiel Institute for the World Economy ISSN 2195–7525 KIEL WORKING PAPER NO. 2070 | JANUARY 2017 ABSTRACT THE COST OF REMOTENESS REVISITED* Richard Franke Redding and Sturm (2008) use the German division as a natural experiment to study the importance of market access for regional development. They show empirically that cities close to the East-West German border experienced a significant decline in population growth due to division. I argue that their results are driven by the internal migration of refugees in the 1950s rather than the loss of market access. In fact, the treatment effect estimated by Redding and Sturm (2008) disappears completely once the refugee share in 1950 and boundary changes of sample cities are taken into account. Keywords: Market Access, Regional Growth, Internal Migration JEL classification: F15, N94, R12, R23 Richard Franke Kiel Institute for the World Economy Kiellinie 66, D-24105 Kiel, Germany Email:
[email protected] * I would like to thank Sebastian Braun, Holger Görg, Maren Ulm, and seminar participants at the Kiel Institute for their comments. The research in this paper was funded by DFG (grant no. BR 4979/1-1, entitled "Die volkswirtschaftlichen Effekte der Vertriebenen und ihre Integration in Westdeutschland, 1945-70"). The responsibility for the contents of this publication rests with the author, not the Institute. Since working papers are of a preliminary nature, it may be useful to contact the author of a working paper about results or caveats before referring to, or quoting, a paper.