A simultaneous equations model of zoning and land values

Abstract Simultaneous equations models with selectivity are estimated by maximum likehood procedures for four land uses. Zoning is a function of lagged land use and relative land values, and values are a function of land tract characteristics. Land value estimates are constructed for all tracts and uses, and are used as explanatory variables in two-limit Tobit models of zoning. Only for single-family residential land does zoning respond to incremental changes in relative land values. The study provides new evidence that zoning matters, and that single-family homes are a preferred land use.