Stephan Heblich Stephen J. Redding Daniel M. Sturm
THE MAKING OF THE MODERN METROPOLIS: EVIDENCE FROM LONDON∗ Downloaded from https://academic.oup.com/qje/article/135/4/2059/5831735 by Princeton University user on 21 August 2020 STEPHAN HEBLICH STEPHEN J. REDDING DANIEL M. STURM Using 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 ac- tivity. 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. JEL Codes: O18, R12, R40 I. INTRODUCTION Modern metropolitan areas include vast concentrations of economic activity, with Greater London and New York City today ∗We are grateful to the University of Bristol, the London School of Economics, Princeton University, and the University of Toronto for research support. Heblich also acknowledges support from the Institute for New Economic Thinking (INET) Grant no. INO15-00025. We thank the editor, four anonymous referees, Victor Cou- ture, Jonathan Dingel, Ed Glaeser, Vernon Henderson, Petra Moser, Leah Platt Boustan, Will Strange, Claudia Steinwender, Matt Turner, Jerry White, Christian Wolmar, and conference and seminar participants at Berkeley, Canadian Institute for Advanced Research (CIFAR), Centre for Economic Policy Research (CEPR), Columbia, Dartmouth, EIEF Rome, European Economic Association, Fed Board, Geneva, German Economic Association, Harvard, IDC Herzliya, LSE, Marseille, MIT, National Bureau of Economic Research (NBER), Nottingham, Princeton, Singapore, St.
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