Borders, market access and urban growth; the case of Saxon towns and the Zollverein

Abstract

The Zollverein, the, customs union between independent German states, removed all internal borders. This paper investigates its economic impact focussing on urban population growth in the state of Saxony. Implications from a economic geography model are tested with a data set on town populations and location characteristics as well as an improved distance measure created with GIS techniques to include geography and infrastructure. Saxony's Zollverein membership led to significantly higher growth for towns close to the liberalized border. The effect depended on a town's size, was reinforced through neighboring markets and worked through influencing migration and natural increase.