Abstract
We document that skyscraper growth since the end of the 19th century has been driven by a reduction in the cost of height, increasing urbanization, and rising incomes. These stylized facts guide us in developing a competitive open-city general equilibrium model of vertical and horizontal city structure. We use the model to show that (i) vertical costs and benefits affect the horizontal land use pattern within cities; (ii) the causal relationship between skyscrapers and urbanization is bi-directional; and (iii) height limits reduce the size of large cities, leading to lower agglomeration economies, productivity, and urban GDP. We substantiate the model’s predictions by novel estimates of urban height gradients.
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