Reproduced with permission. . . . . Introduction Land markets in developing and industrializing countries are subject to regulatory constraints that significantly affect the operation of the market and equilibrium prices and sales, contribute to reduced efficiency, and have negative equity implications. The role of government in land market reform is to remove such regulations, establish a system of predictable market rules, and focus on the provision of information, adjudication of border disputes, enforcement of property rights, and valuation and assessment of land for tax purposes.
Several characteristics distinguish land markets.
Land is a factor of production, essential to the provision of urban housing services and the production of agricultural goods. At the same time land is demanded as a financial asset. It is often a good hedge against inflation, especially in countries where financial markers are not well developed. Even in economies with well-developed financial markets and where inflation is not a serious problem, the acquisition of land is frequently part of the portfolio diversification strategies of economic agents. Insofar as land is a factor of production and a store of wealth, it is also a source of political power, especially in societies where access to other assets is limited.