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

Author

Listed:
  • Ahlfeldt, Gabriel
  • McMillen, Daniel

Abstract

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 esti-mates 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

  • Ahlfeldt, Gabriel & McMillen, Daniel, 2017. "Tall Buildings and Land Values: Height and Construction Cost Elasticities in Chicago, 1870-2010," CEPR Discussion Papers 12351, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:12351
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    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Why Was 2017 Another Record-Breaking Year for Skyscrapers?
      by Jason Barr in Building the skyline on 2018-01-02 14:37:14

    More about this item

    Keywords

    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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