Urban areas are characterised by dispersed employment patterns and mixed land use. Lucas and Rossi Hansberg (LRH) [Econometrica 70 (2002), 1445-1476] developed a model where the urban spatial structure is determined by the external benefits of agglomeration and the commuting costs for workers. This paper reviews and tests the main implications of the LRH-model for residential land rents using semiparametric regression techniques. We show that in predominantly mixed urban areas, agglomeration is an important determinant of the land rent, while in predominantly residential areas proximity to a business area significantly impacts rents, as is predicted by the theory
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