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

59 Pages Posted: 9 Oct 2017

See all articles by Gabriel M. Ahlfeldt

Gabriel M. Ahlfeldt

London School of Economics & Political Science (LSE) - Department of Geography and Environment

Daniel McMillen

University of Illinois at Urbana-Champaign - Department of Economics

Date Written: October 2017

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 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.

Keywords: Chicago, construction cost, density, height, land value, skyscraper

JEL Classification: R20, R30

Suggested Citation

Ahlfeldt, Gabriel M. and McMillen, Daniel, Tall Buildings and Land Values: Height and Construction Cost Elasticities in Chicago, 1870-2010 (October 2017). Available at SSRN: https://ssrn.com/abstract=3049907

Gabriel M. Ahlfeldt (Contact Author)

London School of Economics & Political Science (LSE) - Department of Geography and Environment ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

HOME PAGE: http://personal.lse.ac.uk/ahlfeldg/

Daniel McMillen

University of Illinois at Urbana-Champaign - Department of Economics ( email )

410 David Kinley Hall
1407 W. Gregory
Urbana, IL 61801
United States

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