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Skyscraper height and the business cycle: separating myth from reality

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  • Jason Barr
  • Bruce Mizrach
  • Kusum Mundra

Abstract

This article is the first to rigorously test how skyscraper height and output co-move. Because builders can use their buildings for nonrational or nonpecuniary gains, it is widely believed that height competition occurs near the business cycle peaks. This would suggest that extreme building height is a leading indicator of GDP, since the tallest buildings are likely to be completed at or near the peak of a cycle. To test these claims, first we look at both the announcement and the completion dates for record-breaking buildings and find there is very little correlation with the business cycle. Second, cointegration and Granger causality tests show that while height and output are cointegrated, height does not Granger cause output. These results are robust for the United States, Canada, China and Hong Kong.

Suggested Citation

  • Jason Barr & Bruce Mizrach & Kusum Mundra, 2015. "Skyscraper height and the business cycle: separating myth from reality," Applied Economics, Taylor & Francis Journals, vol. 47(2), pages 148-160, January.
  • Handle: RePEc:taf:applec:v:47:y:2015:i:2:p:148-160
    DOI: 10.1080/00036846.2014.967380
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    References listed on IDEAS

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    1. Jason Barr, 2010. "Skyscrapers and the Skyline: Manhattan, 1895–2004," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 38(3), pages 567-597, September.
    2. Robert H. Frank, 2005. "Positional Externalities Cause Large and Preventable Welfare Losses," American Economic Review, American Economic Association, vol. 95(2), pages 137-141, May.
    3. Phillips, Peter C B, 1995. "Fully Modified Least Squares and Vector Autoregression," Econometrica, Econometric Society, vol. 63(5), pages 1023-1078, September.
    4. Robert J Shiller, 2008. "Historic Turning Points in Real Estate," Eastern Economic Journal, Palgrave Macmillan;Eastern Economic Association, vol. 34(1), pages 1-13, Winter.
    5. William C. Wheaton, 1999. "Real Estate “Cycles”: Some Fundamentals," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 27(2), pages 209-230, June.
    6. James H. Stock & Mark W.Watson, 2003. "Forecasting Output and Inflation: The Role of Asset Prices," Journal of Economic Literature, American Economic Association, vol. 41(3), pages 788-829, September.
    7. Toda, Hiro Y. & Yamamoto, Taku, 1995. "Statistical inference in vector autoregressions with possibly integrated processes," Journal of Econometrics, Elsevier, vol. 66(1-2), pages 225-250.
    8. Helsley, Robert W. & Strange, William C., 2008. "A game-theoretic analysis of skyscrapers," Journal of Urban Economics, Elsevier, vol. 64(1), pages 49-64, July.
    9. Jason Barr, 2012. "Skyscraper Height," The Journal of Real Estate Finance and Economics, Springer, vol. 45(3), pages 723-753, October.
    10. Gonzalo, Jesus & Lee, Tae-Hwy, 1998. "Pitfalls in testing for long run relationships," Journal of Econometrics, Elsevier, vol. 86(1), pages 129-154, June.
    11. Richard K. Green, 1997. "Follow the Leader: How Changes in Residential and Non‐residential Investment Predict Changes in GDP," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 25(2), pages 253-270, June.
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    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Broken Clockism: The “Skyscraper Curse” is Bogus
      by Jason Barr in Skynomics Blog on 2017-11-05 23:53:12
    2. Boon or Boondoggle? The Long Run Economics of the Empire State Building
      by Jason Barr in Skynomics Blog on 2020-08-17 12:28:49

    Citations

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    Cited by:

    1. Auerbach, Jonathan & Wan, Phyllis, 2020. "Forecasting the urban skyline with extreme value theory," International Journal of Forecasting, Elsevier, vol. 36(3), pages 814-828.
    2. Ahlfeldt, Gabriel M. & Barr, Jason, 2022. "The economics of skyscrapers: A synthesis," Journal of Urban Economics, Elsevier, vol. 129(C).
    3. Arvydas Jadevicius, 2016. "Skyscraper indicator and its application in the UK," Entrepreneurial Business and Economics Review, Centre for Strategic and International Entrepreneurship at the Cracow University of Economics., vol. 4(2), pages 37-49.
    4. Alexandru PĂTRUŢI, 2020. "Review of Mark Thornton, The Skyscraper Curse: And How Austrian Economists Predicted Every Major Economic Crisis of the Last Century, Auburn, Alabama, Mises Institute, 2018, 275 pp., pb, ISBN 978-1-61," The Journal of Philosophical Economics, Bucharest Academy of Economic Studies, The Journal of Philosophical Economics, vol. 13(2), pages 226-230, November.
    5. Jason Barr & Jennifer Johnson, 2020. "Skyscrapers and the Happiness of Cities," Eastern Economic Journal, Palgrave Macmillan;Eastern Economic Association, vol. 46(2), pages 344-377, April.
    6. Gustavo S Cortes & Marc D Weidenmier, 2019. "Stock Volatility and the Great Depression," The Review of Financial Studies, Society for Financial Studies, vol. 32(9), pages 3544-3570.
    7. Ilir Nase & Nick van Assendelft & Hilde Remøy, 2019. "Rent Premiums and Vertical Sorting in Amsterdam’s Multi-Tenant Office Buildings," The Journal of Real Estate Finance and Economics, Springer, vol. 59(3), pages 419-460, October.
    8. Lu, Jiaxuan, 2023. "The economics of China’s between-city height competition: A regression discontinuity approach," Regional Science and Urban Economics, Elsevier, vol. 100(C).
    9. Jason Barr & Jingshu Luo, 2021. "Growing Skylines: The Economic Determinants of Skyscrapers in China," The Journal of Real Estate Finance and Economics, Springer, vol. 63(2), pages 210-248, August.

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