A Search for Multiple Equilibria in Urban Industrial Structure

NBER Working Paper No. 10252^*
Issued in January 2004
NBER Program(s): IO PE

---- Abstract -----

Theories featuring multiple equilibria are now widespread across many fields of economics. Yet little empirical work has asked if such multiple equilibria are salient features of real economies. We examine this in the context of the Allied bombing of Japanese cities and industries in WWII. We develop a new empirical test for multiple equilibria and apply it to data for 114 Japanese cities in eight manufacturing industries. The data provide no support for the existence of multiple equilibria. In the aftermath even of immense shocks, a city typically recovers not only its population and its share of aggregate manufacturing, but even the specific industries it had before.

^*Published: Donald R. Davis & David E. Weinstein, 2008.
"A Search For Multiple Equilibria In Urban Industrial Structure," Journal of Regional Science, Blackwell Publishing, vol. 48(1), pages 29-65.

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