The Capitalization of Agricultural Subsidies into Land Prices

Pavel Ciaian, Edoardo Baldoni, d'Artis Kancs and Dušan Drabik ()
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Dušan Drabik: Agricultural Economics and Rural Policy Group, Wageningen University, 6706 KN Wageningen, The Netherlands

Annual Review of Resource Economics, 2021, vol. 13, issue 1, 17-38

Abstract: We review the recent theoretical and empirical literature on the capitalization of agricultural subsidies into land prices. The theoretical literature predicts that agricultural subsidies are capitalized into land prices when land supply is inelastic and land markets function well. The share of capitalized subsidies significantly depends on the implementation of farm subsidies, local land-market institutions, rural market imperfections, and spatial effects. Most empirical studies have shown that agricultural subsidies are only partially capitalized into land prices, estimating that decoupled payments and land-based subsidies exhibit higher capitalization than coupled payments and nonland-based subsidies, respectively. However, estimated capitalization rates vary widely across studies largely because of data availability and identification challenges.

Keywords: agricultural subsidies; capitalization; land prices; land rents; land values; land market; coupled and decoupled payments (search for similar items in EconPapers)
JEL-codes: Q11 Q12 Q18 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (23)

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https://doi.org/10.1146/annurev-resource-102020-100625
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Related works:
Working Paper: The capitalisation of agricultural subsidies into farmland prices (2021)
Working Paper: The Capitalization of Agricultural Subsidies into Land Prices (2020)
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DOI: 10.1146/annurev-resource-102020-100625

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