Economic activity is highly unevenly distributed across space. Understanding what drives the agglomeration and dispersion is important for many economic and policy questions. This column describes a theoretical model of internal city structure incorporating agglomeration and dispersion and heterogeneity in local fundamentals. The authors use the division and reunification of Berlin as a natural experiment. Their findings show that both heterogeneity in locational fundamentals and agglomeration forces are important in shaping a city’s internal structure.
Gabriel Ahlfeldt, Stephen Redding, Daniel Sturm, Nikolaus Wolf, 20 August 2014
Thiess Büttner, 03 November 2006
Written March 2006: Despite its claim to be ‘sexy but poor’, Berlin’s request for a federal handout was refused by the German Constitutional Court. The tighter conditions on federal assistance should ‘harden’ the Lander budget constraints. If they don’t, Berlin may reappear in the Constitutional Court with fiscal problems so severe that the city is not sexy anymore.
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