We report on electronic structure calculations employing density functional theory for rare earth sesquioxides and their alloys. Applying the local density approximation (LDA) for the exchange correlation contribution fails e.g. to describe the insulating behavior of Gd(2)O(3). Therefore, the LDA + U approach is employed. The resulting lattice parameters and atomic coordinates agree very well with experimental data. The optical band gap of a stacked LaLuO(3) (digital alloy) layer is predicted to be larger than the corresponding Gd(2)O(3). (C) 2010 Elsevier B.V. All rights reserved.