History and Industry Location: Evidence from German Airports

Stephen Redding, Daniel Sturm and Nikolaus Wolf

No 6345, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: A central prediction of a large class of theoretical models is that industry location is not necessarily uniquely determined by fundamentals. In these models, historical accident or expectations determine which of several steady-state locations is selected. Despite the theoretical prominence of these ideas, there is surprisingly little systematic evidence on their empirical relevance. This paper exploits the combination of the division of Germany after the Second World War and the reunification of East and West Germany as an exogenous shock to industry location. We focus on a particular economic activity and establish that division caused a shift of Germany's air hub from Berlin to Frankfurt and there is no evidence of a return of the air hub to Berlin after reunification. We develop a body of evidence that the relocation of the air hub is not driven by a change in economic fundamentals but is instead a shift between multiple steady-states.

Keywords: Economic geography; German division; German reunification; Industry location (search for similar items in EconPapers)
JEL-codes: F14 F15 N74 (search for similar items in EconPapers)
Date: 2007-06
New Economics Papers: this item is included in nep-geo and nep-his
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19)

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Related works:
Journal Article: History and Industry Location: Evidence from German Airports (2011)
Working Paper: History and Industry Location: Evidence from German Airports (2007)
Working Paper: History and industry location: evidence from German airports (2007)
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