The Price of Productivity

Gabriel Ahlfeldt, Stephan Heblich, Tobias Seidel and Fan Yin
Additional contact information
Gabriel Ahlfeldt: HU Berlin
Stephan Heblich: University of Toronto
Tobias Seidel: University of Duisburg-Essen
Fan Yin: HU Berlin, Berlin School of Economics

No 563, Rationality and Competition Discussion Paper Series from CRC TRR 190 Rationality and Competition

Abstract: We construct a new micro-geographic commercial rent index for Germany to study the capitalization of agglomeration economies into floor space prices. In large local labor markets, commercial rents decline by -17% per kilometer from the central business district, compared to 13% for residential rents, reflecting stronger agglomeration benefits at the center. Commercial rents in central business districts increase with local labor market size at an elasticity of 15%, implying that wage responses capture only about half of the agglomeration effect on total factor productivity.

Keywords: floor space; rents; spatial equilibrium; total factor productivity (search for similar items in EconPapers)
JEL-codes: L2 R3 (search for similar items in EconPapers)
Date: 2026-02-09
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