IN THIS PAPER, WE ANALYZE AN EFFECT OF ZONING REGULATION ON LAND PRICES, I.E. AN EFFECT OF REGULATION OF F.A.R.(FLOOR AREA RATIO) AND LAND USE. FOR THE PURPOSE, LAND PRICING STRUCTURAL MODEL IS FORMULATED BY EXTENDING AND PARAMETRIZING TRADITIONAL DIVIDEND DISCOUNT MODEL. NOW, THE MODEL CONSISTS OF REGULATED F.A.R., MAXIMUM RENT, INTEREST RATE AND EXPECTATION OF RISING LAND PRICES. USING PANEL DATA OBSERVED AT 75 POINTS ACROSS 7 YEARS, THE MODEL IS ESTIMATED AS TWO-ERROR COMPONENTS(2EC) MODEL BY GENERALIZED LEAST SQUARES ESTIMATOR. WE GET SIGNIFICANT COEFFCIENTS AND EXPECTED SIGN OF ALL VARIABLES. SIMULATING THE MODEL, WE SHOW THAT CONTROLLING F.A.R. OR LAND USE LEAD TO DRAMATIC CHANGE OF LAND PRICES. SO, THE RESULTS SUGGEST THAT HIGH LEVEL OF F.A.R. HAS TO BE REGULATED VERY CAREFULLY WITH LAND PRICES RISING.
