The fall of the Berlin wall has led to a monumental change in the social and economic structure of most countries in Central and Eastern Europe (CEE) and the CIS that have profoundly affected the nature of the rural sector and the livelihood opportunities open to rural residents. Prior to 1990, most of these countries had de facto abolished private property rights in favor of state or cooperative ownership. Agricultural production was in most cases collective, leading to inefficiencies due to free-riding, moral hazard, and lack of individual incentives for effort supply as well as investment. In large collective or stateowned farms (about 2000 ha; 500 workers) lack of transparency added to the difficulties of monitoring implied by sheer size. The goal was to meet centrally prescribed targets established with little consideration to profit or hard budget constraints, and their survival relied on write-offs and subsidies, and political connections. Keywords: land reform, political nature of reform, complementary investment, Europe, agriculture, GNP.