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Tall Building and Land Values: Height and Construction Cost Elasticities in Chicago, 1870 - 2010


  • Gabriel Ahlfeldt
  • Daniel McMillen


Cities around the world are experiencing unprecedented vertical growth. Yet, the economics of skyscrapers remain empirically understudied. This paper analyzes the determinants of the urban height profile by combining a micro-geographic data set on tall buildings with a unique panel of land prices covering 140 years. We provide novel estimates of the land price elasticity of height, the height elasticity of construction cost, and the elasticity of substitution between land and capital for tall buildings. In line with improvements in construction technology, the land price elasticity of height increased substantially over time, rationalizing a trend to ever taller buildings. The land price elasticity of height is larger for commercial than for residential buildings, suggesting that the typical segregation of land uses within cities is not exclusively shaped by the demand side, but also by the supply side.

Suggested Citation

  • Gabriel Ahlfeldt & Daniel McMillen, 2017. "Tall Building and Land Values: Height and Construction Cost Elasticities in Chicago, 1870 - 2010," CESifo Working Paper Series 6730, CESifo.
  • Handle: RePEc:ces:ceswps:_6730

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    References listed on IDEAS

    1. Jason Barr, 2013. "Skyscrapers And Skylines: New York And Chicago, 1885–2007," Journal of Regional Science, Wiley Blackwell, vol. 53(3), pages 369-391, August.
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    Blog mentions

    As found by, the blog aggregator for Economics research:
    1. Why Was 2017 Another Record-Breaking Year for Skyscrapers?
      by Jason Barr in Skynomics Blog on 2018-01-02 14:37:14
    2. The Technology of Tall (Part I): Skeletons, Outriggers, and Buttresses
      by Jason Barr in Skynomics Blog on 2019-07-16 12:22:22
    3. Skyscrapers and Cities: A Q&A Interview with Edward Glaeser (Part I)
      by Jason Barr in Skynomics Blog on 2018-09-05 12:06:05
    4. The Economics of Skyscraper Height (Part I)
      by Jason Barr in Skynomics Blog on 2018-12-17 14:12:57


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    Cited by:

    1. Ahlfeldt, Gabriel M. & Nitsch, Volker & Wendland, Nicolai, 2019. "Ease vs. noise: Long-run changes in the value of transport (dis)amenities," Journal of Environmental Economics and Management, Elsevier, vol. 98(C).
    2. Ahlfeldt, Gabriel M. & Pietrostefani, Elisabetta, 2019. "The economic effects of density: A synthesis," Journal of Urban Economics, Elsevier, vol. 111(C), pages 93-107.
    3. Arribas-Bel, Daniel & Garcia-Lopez, Miquel-Angel & Viladecans-Marsal, Elisabet, 2020. "Building(s and) cities: Delineating urban areas with a machine learning algorithm," CEPR Discussion Papers 14450, C.E.P.R. Discussion Papers.
    4. Xu, Hangtian, 2020. "Land Price Fluctuations, Commercial-Residential Segregation, and Gentrification," MPRA Paper 98844, University Library of Munich, Germany.
    5. Gabriel M. Ahlfeldt & Volker Nitsch & Nicolai Wendland, 2019. "Ease Versus Noise: Long-Run Changes in the Value of Transport (Dis)amenities," CEP Discussion Papers dp1631, Centre for Economic Performance, LSE.
    6. 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.
    7. Xu, Hangtian, 2019. "The burst of the real estate bubble as a promoter of gentrification in Tokyo and Osaka, 1980–2017," MPRA Paper 96803, University Library of Munich, Germany.

    More about this item


    Chicago; construction cost; density; height; land value; skyscraper;

    JEL classification:

    • R20 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - General
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General

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