Skyscrapers and the economy

Nestor Garza and Colin Lizieri

ERSA conference papers from European Regional Science Association

Abstract: SKYSCRAPERS AND THE ECONOMY Urban literature and particularly urban economics, does not deal frequently with skyscrapers, despite their ominous visual presence in cities skyline. The traditional urban economics model considers the heights of buildings to increase with the size (demographic and economic) of the cities, and the resulting land rent growth, while geographical extension diminishes these heights. This general prediction has been criticized by its inadequacy to deal with what it looks like an extreme height when skyscrapers are compared to the rest of the built structures, plus a certain lack of organic articulation into the urban fabric. As a complement to traditional theory, game theory interpretation makes use of an “all pay auction†structure, to predict above optimal height for the tallest building in a city at each moment of time; Austrian business cycle theory states that the tallest project building announcement coincides with business and liquidity peak, a predictor of the downturn. Following literature criticisms both theoretical and empirical, this article adds an explicit time dimension, in order to control a panel testing framework for the three of these theories, as long as the first two are static-comparative ones, while the third is concentrated on the economic cycle rather than the long-term trend. Latin American skyscrapers information about 23 cities located at 8 countries during the period 1990-2010 is used in the panel testing framework. The possibility of making a simultaneous test of the three theories is discussed, and it is detected that for the Latin American case, traditional theory seems to offer the best adjustment, while game theory and business cycle does not seem to be clear determinants of skyscrapers height. Keywords: Latin America, Cities, Urban Economics, Built Environment JEL Classification: R14, C70, L00

Date: 2012-10
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