This paper has two main goals. First it seeks to contribute to theory about land values and land market behaviour in Third World cities. Secondly, it seeks to evaluate the policy implications for land development in urban areas. The research questions identified form part of a major ongoing project based at the University of Cambridge and financed by the UK Economic and Social Research Council. It draws upon fieldwork in two intermediate-sized Mexican cities (Puebla and Toluca), and it is anticipated that the research will be expanded to embrace independently financed research teams working in similar environments in Brazil and elsewhere. In particular, the paper focuses upon the impact and outcomes of contemporary land development policies, some of which are being actively promoted by international agencies such as the World Bank. In this context it is desirable to identify policy directions which might, ultimately, lead to an equitable supply of urban land using instru? ments that are culturally and economically sensitive to local environments. Interest in Third World land markets has increased in recent years. Much of the stimulus for this work has come from self-help housing analysis whereby land is often acquired illegally by low-income groups. In many cities land policy has become the key consideration in the formulation of lowincome housing policy. Privately generated self-help forms of housing production invariably greatly exceeds that of formal housing through the public sector (Van Vliet, 1989; Hardoy and Satterthwaite, 1981). Yet there is also a greater preparedness today for governments to intervene in the land market directly, in order to improve the supply of low cost housing land or to resolve 'clouded' land titles arising from earlier illegal development (Linn, 1983; Doebele, 1987). This willingness forms part-and-parcel of the shift towards a more supportive stance taken towards 'spontaneous' settlements in recent years, and which is embodied in programmes of upgrading, sites-andservices, core-units and other similar schemes (World Bank, 1975; Payne, 1984). While this policy shift has not occurred without criticism (Ward, 1982; Burgess, 1985), it is generally accepted as having offered the poor access to ownership which they would otherwise have been denied, albeit at considerable economic and social costs. There is some indication that the adoption of 'supportive' government policies and a more systematic response to low income residents' demands has improved housing condi-