Working Paper: NBER ID: w20467
Authors: Richard Hornbeck; Daniel Keniston
Abstract: Historical city growth, in the United States and worldwide, has required remarkable transformation of outdated durable buildings. Private land-use decisions may generate inefficiencies, however, due to externalities and various rigidities. This paper analyzes new plot-level data in the aftermath of the Great Boston Fire of 1872, estimating substantial economic gains from the created opportunity for widespread reconstruction. An important mechanism appears to be positive externalities from neighbors' reconstruction. Strikingly, gains from this opportunity for urban redevelopment were sufficiently large that increases in land values were comparable to the previous value of all buildings burned.
Keywords: urban growth; economic growth; Great Boston Fire; reconstruction; neighborhood externalities
JEL Codes: H23; K11; N31; N91; O18; R3
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Great Boston Fire (H84) | immediate increase in land values in burned area (R52) |
| reconstruction opportunity (N60) | economic gains (O49) |
| reconstruction (P21) | increase in building values in burned area (R38) |
| reconstruction (P21) | increase in building values in nearby unburned areas (R33) |
| Great Boston Fire (H84) | positive externalities from reconstruction (H54) |
| Great Boston Fire (H84) | greater economic impacts than individual building fires (F69) |