The Death and Life of Great British Cities

The paper presented in this Mannheim Applied Seminar studies how cities’ industrial structure shapes their life and death. The authors‘ analysis exploits the large heterogeneity in the early composition of English and Welsh cities. They extract built-up clusters from early historical maps, identify settlements at the onset of the nineteenth century, and isolate exogenous variation in the nature of their rise during the transformation of the economy by the end of the nineteenth century. The authors then estimate the causal impact of cities’ population and industrial specialization on their later dynamics. They find that cities specializing in a small number of industries decline in the long run. The authors develop a dynamic spatial model of cities to isolate the forces which govern their life and death. Intratemporally, the model captures the role of amenities, land, local productivity and trade in explaining the distribution of economic activity across industries and cities. Intertemporally, the model can disentangle the role of aggregate industry dynamics from city-specific externalities. They find that the long-run dynamics of English and Welsh cities is explained to a large extent by such dynamic externalities `a la Jacobs.