We use the life satisfaction approach to value air quality, combining individual-level panel and high-resolution SO2 data. To avoid simultaneity problems, we construct a novel instrument exploiting the natural experiment created by the mandated scrubber installation at power plants, with wind directions dividing counties into treatment and control groups. We find a negative effect of pollution on well-being that is larger for instrumental variable than conventional estimates, robust to controls for local unemployment, particulate pollution, reunification effects and rural/urban trends, and larger for environmentalists and predicted risk groups. To calculate total willingness-to-pay, the estimates are supplemented by hedonic housing regressions.

The 1930’s American Dust Bowl was an environmental catastrophe that greatly eroded sections of the Plains. Analyzing new data collected to identify low-, medium-, and high-erosion counties, the Dust Bowl is estimated to have immediately, substantially, and persistently reduced agricultural land values and revenues. During the Depression and through at least the 1950’s, there was limited reallocation of farmland from activities that became relatively less productive. Agricultural adjustments, such as reallocating land from crops to livestock, recovered only 14 % to 28 % of the initial agricultural cost. The economy adjusted predominately through migration, rather than through capital inflows and increased industry.

Abstract—A central prediction of a large class of theoretical models is that industry location is not uniquely determined by fundamentals. Despite the theoretical prominence of this idea, there is little systematic evidence in support of its empirical relevance. This paper exploits the division of Ger-many after World War II and the reunification of East and West Germany as an exogenous shock to industry location. Focusing on a particular economic activity, an air hub, we develop a body of evidence that the relocation of Germany’s air hub from Berlin to Frankfurt in response to division is a shift between multiple steady states. I.

This paper examines the historical impact of railroads on the American economy. Expansion of the railroad network and decreased trade costs may affect all counties directly or indirectly, an econometric challenge in many empirical settings. However, the total impact on each county can be summarized by changes in that county’s “market access, ” a reduced-form expression derived from general equilibrium trade theory. We measure counties ’ market access by constructing a network database of railroads and waterways and calculating lowest-cost county-to-county freight routes. As the railroad network expanded from 1870 to 1890, changes in market access are capitalized in agricultural land values with an estimated elasticity of 1.5. Removing all railroads in 1890 would decrease the total value of US agricultural land by 73 % and GNP by 6.3%, more than double social saving estimates (Fogel 1964). Fogel’s proposed Midwestern canals would mitigate only 8 % of losses from removing railroads. For helpful comments and suggestions, we thank seminar participants at Berkeley, Harvard, Stanford, UC-Davis, and UC-Irvine. We are grateful to Jeremy Atack and coauthors for sharing their data. Irene

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Abstract This paper sheds light on the transferability of human capital in periods of dramatic structural change by analyzing the unique event of German Reunification. We explore whether the comparatively low labor productivity in East Germany after reunification is caused by the depreciation of human capital at reunification, or by unfavorable job characteristics. East German workers should have been hit harder by reunification the more specific human capital was. Treating both human capital and job characteristics as unobservables, we derive their relative importance in explaining the low labor productivity by estimating a spatial structural model that predicts commuting behavior across the former East-West border and the resulting regional unemployment rates. The identification of the model is based on the slope of the unemployment rate across the former border: the larger the human capital differences between East and West, the less commuting across the border takes place, and the sharper is the increase of the unemployment rate at the former border. The results indicate that East and West German skills are very similar, while job characteristics differ significantly between East and West. Hence, they suggest that a significant part of the human capital accumulated in the East before 1990 was transferable. (JEL: C15, J24, J61; keywords: transferability of human capital, spatial allocation of labor)

Abstract Large scale transport infrastructure investments connect both large metropolitan centers of production as well as small peripheral regions. Are the resulting trade cost reductions a force for the diffusion of industrial and total economic activity to peripheral regions, or do they reinforce the concentration of production in space? This paper exploits China's National Trunk Highway System as a large scale natural experiment to contribute to our understanding of this question. The network was designed to connect provincial capitals and cities with an urban population above 500,000. As a side effect, a large number of small peripheral counties were connected to large metropolitan agglomerations. To address non-random route placements on the way between targeted city nodes, I propose an instrumental variable strategy based on the construction of least cost path spanning tree networks. The estimation results suggest that network connections have led to a reduction in GDP growth among non-targeted peripheral counties. This effect appears to be driven by a significant reduction in industrial output growth. Additional results present evidence in support of a trade based channel in the light of falling trade costs between peripheral and metropolitan regions.

Abstract: We argue that identification problems bedevil applied spatial economic research. Spatial econometrics usually solves these problems by deriving estimators assuming that functional forms are known and by using model comparison techniques to let the data choose between competing specifications. We argue that in many situations of interest this, at best, achieves only very weak identification. Worse, in many cases, such an approach will be uninformative about the causal economic processes at work, rendering much applied spatial econometric research 'pointless', unless the main aim is description of the data. We advocate an alternative approach based on the 'experimental paradigm' which puts issues of identification and causality at centre stage.

An electronic version of the paper may be downloaded • from the SSRN website: www.SSRN.com • from the RePEc website: www.RePEc.org • from the CESifo website: Twww.CESifo-group.deT

This journal has been launched in 1972 under the title Regional and Urban Economics, which is almost the name of the JEL-classification entry R. The first point we wish to make is that, by the time this journal was launched, urban economics was already a well-established field drawing on new concepts and tools. By contrast, the scientific status of regional economics was less clear in that regional concepts, models and techniques were too often a mere extension of those used at the national level, with an additional index identifying the different regions (see, e.g., interregional input-output matrices or the Harrod-Domar model of regional growth). 1 The Samuelsonian emphasis put on trade theory also acted as an impediment to the further development of regional economics, the trade of goods being viewed as a substitute to the mobility of factors. Today, thanks to the surge of new economic geography (in short, NEG), it is time to re-think regional economics. This is what we wish to do in this note. It is worth stressing from the outset that, in order to talk even halfway sensibly about regional economics, it is necessary to tackle the following two questions: (i) what do we