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Discussion Paper Details

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

Author(s): Gabriel Ahlfeldt and Daniel McMillen

Publication Date: October 2017

Keyword(s): Chicago, construction cost, density, height, land value and skyscraper

Programme Area(s): International Trade and Regional Economics

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.

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Bibliographic Reference

Ahlfeldt, G and McMillen, D. 2017. 'Tall Buildings and Land Values: Height and Construction Cost Elasticities in Chicago, 1870-2010'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=12351