Working Paper: CEPR ID: DP12351
Authors: Gabriel Ahlfeldt; Daniel McMillen
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 elas-ticity 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.
Keywords: Chicago; Construction Cost; Density; Height; Land Value; Skyscraper
JEL Codes: R20; R30
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Increasing land prices (R31) | Taller buildings (L74) |
| Developers' responses to economic conditions (R38) | Taller buildings (L74) |
| Advancements in construction technology and changes in zoning laws (L74) | Increased land price elasticity of height (R31) |
| Building height (L74) | Construction costs (L74) |
| Land and capital substitution elasticity (D24) | Building height (L74) |