The billion pound drop: the Blitz and agglomeration economies in London

The economics of density: evidence from the Berlin wall

Gerard Dericks and Hans Koster

Journal of Economic Geography, 2021, vol. 21, issue 6, 869-897

Abstract: We exploit locally exogenous variation from the Blitz bombings to quantify the effect of redevelopment frictions and identify agglomeration economies at a micro-geographic scale. Employing rich location and office rental transaction data, we estimate reduced-form analyses and a spatial general equilibrium model. Our analyses demonstrate that more heavily bombed areas exhibit taller buildings today, and that agglomeration elasticities in London are large, approaching 0.2. Counterfactual simulations show that if the Blitz had not occurred, the concomitant reduction in agglomeration economies arising from the loss of higher-density redevelopment would cause London’s present-day gross domestic product to drop by some 10% (or £50 billion).

Keywords: Redevelopment; regulation; office rents; agglomeration economies (search for similar items in EconPapers)
JEL-codes: R14 R33 R38 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (2)

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Working Paper: The billion pound drop: the blitz and agglomeration economies in London (2018)
Working Paper: The billion pound drop: the blitz and agglomeration economics in London (2018)
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