Infrastructure Shocks and Regional Resilience: Evidence From the 2012 Cologne‐Leverkusen Bridge Closure

ABSTRACT The unexpected 2012 closure of a key bridge on the Rhine River near Cologne, Germany was an exogenous shock to businesses and residents nearby. We exploit this event as a quasi‐experiment to study the impact of this critical infrastructure shock on the region. We propose a basic conceptual framework where the bridge closure significantly reduced accessibility discontinuously for one side of the bridge, raising transportation costs. Local economic agents adapted via different mechanisms: real asset prices fell gradually and proportionally to the loss in accessibility, and firms decided to move‐out in cases where the loss in accessibility outweighed the fixed cost of relocation. We then estimate the implications of this framework empirically. We show that the bridge closure reduced the market potential of locations on the left side of the Rhine by 10%–15%. Relying on a difference‐in‐differences estimation approach, we then find that firm move‐outs rose by over 40% on the left side of the Rhine River after the closure. Move‐outs were directed toward their ideal destination out of the region (many of which ended up in Berlin), rather than moving locally. We further show that commercial rental prices fell by around 13%–15% and home prices fell by 8%–14% after the closure on the left side of the river, with the impact attenuating further from the bridge. Overall, our analysis demonstrates the impact of a shock to critical infrastructure on regional resilience and explores the different mechanisms by which it occurred, shedding light on the magnitude, duration, and continuity of the impacts on different sectors.