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Tall buildings and land values: height and construction cost elasticities in Chicago, 1870 – 2010

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  • Ahlfeldt, Gabriel M.
  • McMillen, Daniel P.

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 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 build-ings. 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 M. & McMillen, Daniel P., 2018. "Tall buildings and land values: height and construction cost elasticities in Chicago, 1870 – 2010," LSE Research Online Documents on Economics 84873, London School of Economics and Political Science, LSE Library.
  • Handle: RePEc:ehl:lserod:84873
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    File URL: http://eprints.lse.ac.uk/84873/
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    References listed on IDEAS

    as
    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 EconAcademics.org, 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

    Citations

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    Cited by:

    1. Ahlfeldt, Gabriel M. & Pietrostefani, Elisabetta, 2019. "The economic effects of density: A synthesis," Journal of Urban Economics, Elsevier, vol. 111(C), pages 93-107.
    2. 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).
    3. Daniel Arribas-Bel & Miquel-Àngel Garcia-López & Elisabet Viladecans-Marsal, 2019. "Building(s and) cities: delineating urban areas with a machine learning algorithm," Working Papers 2019/10, Institut d'Economia de Barcelona (IEB).
    4. Gilles Duranton & Diego Puga, 2020. "The Economics of Urban Density," Journal of Economic Perspectives, American Economic Association, vol. 34(3), pages 3-26, Summer.
    5. Xu, Hangtian, 2020. "Land Price Fluctuations, Commercial-Residential Segregation, and Gentrification," MPRA Paper 98844, University Library of Munich, Germany.
    6. Jenny Schuetz, 2020. "Teardowns, popups, and renovations: How does housing supply change?," Journal of Regional Science, Wiley Blackwell, vol. 60(3), pages 459-480, June.
    7. Ahlfeldt, Gabriel M. & Nitsch, Volker & Wendland, Nicolai, 2019. "Ease versus noise: long-run changes in the value of transport (dis)amenities," LSE Research Online Documents on Economics 102824, London School of Economics and Political Science, LSE Library.
    8. 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.
    9. 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

    Keywords

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

    JEL classification:

    • Q15 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Land Ownership and Tenure; Land Reform; Land Use; Irrigation; Agriculture and Environment

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