№ 2017/1

This paper analyses the institutional framework to develop an effective agricultural land use system in Ukraine. The analysis aims to determine the efficiency of the national institutional system and justify the ways to improve it. The methodological approach is based on the principles of structural functionalism.
It is proved, that existing institutional system realizes its coordinating function in such a way that leads to institutional gaps between formal and informal property institutions, a backlog of the informal institutions and "shadow" land relations. As to the distributive function, it leads to structural imbalances, dominance of corporate over private interests, and dominance of agricultural production over rural development. This is an indicator of an institutional dysfunction, which means the failure to adapt, a mismatch between the formal and informal norms and nowadays challenges for sustainable agricultural and rural development. This is also an indicator that the institutional system of land relations is oriented to ensure the allocative efficiency while the adaptive efficiency remains at a low level. To enhance the adaptive efficiency, it is necessary to implement the following policy mechanisms:
- In order to overcome institutional gaps, it is necessary to introduce positive selective incentives for the development of informal institutions, and prioritize the development of inter-group social capital with confidence and social interactions between different social groups (officials, rural communities, land users);
- In order to overcome the institutional imbalances, it is necessary to prioritize both social and ecological components in the development of the national land use system, and the interests of small landowners and family farms.
To ensure that agricultural land use is socially oriented and provide the adaptive efficiency of the institutional environment, it is necessary to harmonize the formal, informal and control institutions.

Keywords: institutional environment, agricultural land use, adaptive efficiency, social efficiency