Discussion Paper No. 563
February 16, 2026
The Price of Productivity
Author:
Abstract:
We construct a new micro-geographic commercial rent index for Germany to study the capitalization of agglomeration economies into floor space prices. In large local labor markets, commercial rents decline by -17% per kilometer from the central business district, compared to 13% for residential rents, reflecting stronger agglomeration benefits at the center. Commercial rents in central business districts increase with local labor market size at an elasticity of 15%, implying that wage responses capture only about half of the agglomeration effect on total factor productivity.
Keywords:
floor space; rents; spatial equilibrium; total factor productivity;
JEL-Classification:
L2; R3;
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Discussion Paper No. 561
January 26, 2026
The Economics of Architecture
Author:
Abstract:
We illustrate the coordination problem in the provision of distinctive architectural design that arises from design externalities within a quantitative model. To quantify the model, we conduct a quantitative review of a growing literature concerned with the costs and benefits of distinctive design as well as a survey of architectural design preferences. We find that distinctive buildings sell at a 15% premium, on average. Positive design spillovers from distinctive nearby buildings result in a 9% premium. Distinctive buildings, however, are about 25% more expensive to build. The distribution of design ratings within buildings is well described by a Fr´echet distribution with a shape parameter of about 4. Parametrising the model to match these moments, we show in counterfactual simulations that the optimal subsidy of distinctive buildings amounts to 10% of construction costs.
Keywords:
architecture; design; economics; regulation; welfare;
JEL-Classification:
R3; N9;
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Discussion Paper No. 544
September 19, 2025
Measuring the Urban Quality of Life Premium
Author:
Abstract:
We employ a quantitative spatial model that accounts for trade fritions—generated by trade costs and non-tradable services—and mobility frictions—generated by idiosyncratic tastes and local ties—to recover unobserved quality of life (QoL) and estimate the urban QoL premium. For Germany, we find that a city twice as large offers, on average, a 22% higher QoL to the average resident—far exceeding the urban wage premium of 4%. Our model-based Monte Carlo simulations suggest that the lack of strong empirical evidence for an urban QoL premium in earlier literature likely stems from measurement error in the Rosen-Roback framework due to omitted spatial frictions.
Keywords:
housing; spatial frictions; rents; prices; productivity; quality of life; spatial equilibrium; wages;
JEL-Classification:
J2; J3; R2; R3; R5;
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Discussion Paper No. 526
February 14, 2025
Geoeconomic Fragmentation and the Role of Non-Aligned Countries
Author:
Abstract:
We analyze how non-aligned countries affect welfare outcomes in scenarios of global trade fragmentation. Using a quantitative trade model covering 141 countries and 65 economic sectors, we simulate different scenarios of geoeconomic fragmentation. We find that major non-aligned countries benefit from their neutral position, with welfare gains of up to 0.7%. Their manufacturing sectors particularly benefit under incomplete fragmentation, experiencing value added gains of 2.5%, while agriculture and services face modest declines. These gains turn into significant losses if they join either the Western or Eastern trade bloc. Moreover, world welfare losses increase from -1.9% under incomplete fragmentation to -2.7% when non-aligned countries join the West and to -3.7% when they join the East. Our results highlight the strategic importance of non-aligned countries in mitigating the negative effects of global trade fragmentation.
Keywords:
trade policy; gains from trade; global value chains; quantitative trade models; general equilibrium;
JEL-Classification:
F11; F13; F15; F17; F51;
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Discussion Paper No. 522
January 23, 2025
Measuring Quality of Life under Spatial Frictions
Author:
Abstract:
Using a quantitative spatial model as a data-generating process, we explore how spatial frictions affect the measurement of quality of life. We find that under a canonical parameterization, mobility frictions—generated by idiosyncratic tastes and local ties—dominate trade frictions—generated by trade costs and non-tradable services—as a source of measurement error in the Rosen-Roback framework. This non-classical measurement error leads to a downward bias in es-timates of the urban quality-of-life premium. Our application to Germany reveals that accounting for spatial frictions results in larger quality-of-life differences, different quality-of-life rankings, and an urban quality-of-life premium that exceeds the urban wage premium.
Keywords:
housing; spatial frictions; rents; prices; productivity; quality of life; spatial equilibrium; wages;
JEL-Classification:
J200; J300; R200; R300; R500;