Investing in farming under uncertainty and redistributive support

Luca Di Corato () and Dimitrios Zormpas
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Luca Di Corato: Universita Ca Foscari Venezia

Discussion Paper Series from Department of Economics, University of Macedonia

Abstract: We develop a real-options model to assess how the post-2023 Common Agricultural Policy (CAP) income support scheme influences landholders investment behavior. The reformed CAP increased per-hectare support for small farms through redistributive payments linked to first hectares. Small farms respond to higher payments with more aggressive investment strategies. Instead large farms exhibit a nuanced response since higher basic payments encourage investments, but greater redistributive payments lead to more conservative behavior. These dynamics create a pooling effect around the farm-size threshold distinguishing large from small farms. Our analysis contributes to the broader debate regarding land value capitalization and CAP fiscal implications.

Keywords: Real Options; Common Agricultural Policy; Income stability; Land Development. (search for similar items in EconPapers)
JEL-codes: C61 Q15 R14 (search for similar items in EconPapers)
Date: 2026-06, Revised 2026-06
New Economics Papers: this item is included in nep-agr
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Persistent link: https://EconPapers.repec.org/RePEc:mcd:mcddps:2026_06

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