NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

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

Richard Hornbeck, Daniel Keniston

NBER Working Paper No. 20467
Issued in September 2014
NBER Program(s):   DAE   DEV   EEE   EFG   LE   PE

Historical city growth, in the United States and worldwide, has required remarkable transformation of outdated durable buildings. Private land-use decisions may generate inefficiencies, however, due to externalities and various rigidities. This paper analyzes new plot-level data in the aftermath of the Great Boston Fire of 1872, estimating substantial economic gains from the created opportunity for widespread reconstruction. An important mechanism appears to be positive externalities from neighbors' reconstruction. Strikingly, gains from this opportunity for urban redevelopment were sufficiently large that increases in land values were comparable to the previous value of all buildings burned.

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Document Object Identifier (DOI): 10.3386/w20467

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