The Agglomeration of Urban Amenities: Evidence from Milan Restaurants
- American Economic Review: Insights (Forthcoming)
We test for the presence of agglomeration externalities in Milan's
restaurant sector and estimate their effects using the abolition of
a unique regulation that restricted where restaurants could locate.
Before 2005, Milan mandated a minimum distance between restaurants which kept the number of establishments artificially constant
across neighborhoods. The regulation was abolished in 2005. Using
administrative data, we find that after 2005 the geographical concentration of restaurants increased sharply and at an accelerating
rate. Consistent with the existence of strong and self-sustaining
agglomeration externalities, the city's restaurants agglomerated in
some neighborhoods and deserted others, leading to an growing divergence in local amenities across neighborhoods.
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