American Economic Review Vol. 107 No. 6 2017

Creative Destruction: Barriers to Urban Growth and the Great Boston Fire of 1872

Richard Hornbeck¹; Daniel Keniston²

¹ Professor of Economics and Neubauer Family Faculty Fellow, University of Chicago Booth School of Business, 5807 South Woodlawn Avenue, Chicago, IL 60637, and NBER (e-mail: ) · ² Assistant Professor of Economics, Department of Economics, Yale University, 27 Hillhouse Avenue, Room 22, New Haven, CT 06520, and NBER (e-mail: )

Abstract

Urban growth requires the replacement of outdated buildings, yet growth may be restricted when landowners do not internalize positive spillover effects from their own reconstruction. The Boston Fire of 1872 created an opportunity for widespread simultaneous reconstruction, initiating a virtuous circle in which building upgrades encouraged further upgrades of nearby buildings. Land values increased substantially among burned plots and nearby unburned plots, capitalizing economic gains comparable to the prior value of burned buildings. Boston had grown rapidly prior to the Fire, but negative spillovers from outdated durable buildings had substantially constrained its growth by dampening reconstruction incentives.

DOI

10.1257/aer.20141707

Volume

107

Issue

6

Pages

1365-1398

Language

en

Sources

bibtex:phds-export.bib openalex crossref

Cite

APA 7 MLA 9 Chicago (author–date) Harvard Elsevier Harvard (JFE, JBF…) The Accounting Review Academy of Management American Marketing Association INFORMS (Management Science) Copy citation Copied ✓