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The ultimately disappointing results of past redistributive reforms caused contemporary policy-makers in Latin America to search for alternatives. In recent years, the issue of transforming tenure structure through the market mechanism has moved into the spotlight. This paper argues that it is extremely helpful to approach the topic from an institutional perspective. The institution of property rights is central to the discussion. New questions emerge: How are transactions actually being carried out in the rural setting? What role do transaction costs and the corresponding institutions such as property rights play? What influence may externalities have? A meaningful analysis of how rural land markets work cannot be done in a conventional neoclassical scenario. The rural economic environment is characterized by imperfect markets, asymmetric information and uncertainty. In addition, economic behaviour is often guided by the intrinsic logic of the peasant farm which differs markedly from the way commercial agriculture operates. No one property rights regime is universally valid. A whole array of agricultural institutions emerges as a response to different and evolving economic parameters. The complexities of rural land markets have to be considered in the design of effective policies. [author]
