This research studies the vertical urban structure in China and its economic impacts by exploiting the gradual build-up of skyscrapers in various cities. I find China's construction pattern challenges the pre-existing consensus that skyscrapers result from the substitution of expensive land with capital. Rather, these tall buildings are largely attributable to substantial involvement of local governments which offer developers sizable discounts on the land parcels for the construction. The analyses show that skyscrapers generated very localized economic impacts by merely increasing the land value within 1 kilometer of the skyscraper, but did not confer benefits on the wider region. The realized returns to the subsidy fall short of local governments' expectations. These findings refute the economic effectiveness of state-engineered urbanization drive, indicating resource mis-allocation caused by distortions in the land market.
White Elephants or Cost-Effective Investments? Evidence from Chinese Skyscrapers
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