The capitalization of CAP payments into land rental prices: a grouped fixed-effects estimator

Daniele Valenti, Danilo Bertoni, Daniele Cavicchioli and Alessandro Olper

Applied Economics Letters, 2021, vol. 28, issue 3, 231-236

Abstract: This article investigates the capitalization of farm subsidies in Italy by relying on a novel approach based on the Grouped Fixed Effect (GFE) estimator. This methodology allows us to account for the regional unobserved time-varying determinants of the Italian land values. Results show that the elasticity of land price with respect to coupled and decoupled subsidies is below one. Particularly, for the latter payments, the degree of capitalization declines with decreasing competition in farmland markets.

Date: 2021
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DOI: 10.1080/13504851.2020.1749227

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