The capitalisation of CAP subsidies into land rents and land values in the EU

Edoardo Baldoni and Pavel Ciaian

No JRC125220, JRC Research Reports from Joint Research Centre

Abstract: The objective of this report is to estimate the capitalization of different Common Agricultural Policy (CAP) subsidies into rental prices and value of land in the EU. We use FADN data at regional level for the period 1989–2016 and apply a dynamic panel approach (GMM estimator) to estimate the capitalization effect of coupled direct payments (CDP), decoupled direct payments (DDP) and rural development measures at EU level. The estimated results suggest the short-run (long-run) capitalization rate of DDP to be between 9.1% and 46.2% (11% and 55%). The heterogeneous DDP models appear to have a lower capitalization rate by between 34% and 37% in the short-run and between 41% and 45% in the long-run as compared to the flat-rate models. The capitalization rate of CDPs is estimated to be around 6% in the short-run and 7% in the long-run. Rural development measures are generally found not to affect land rental prices. Regarding the capitalization estimates for land values, they are not robust and consistent across estimated models. The estimates suggest that only DDPs may cause statistically significant capitalization effects into land values: a capitalization rate between 28.8% and 32.1% in the short-run and between 154% and 164% in the long-run.

Keywords: CAP; subsidies (search for similar items in EconPapers)
Date: 2021-09
New Economics Papers: this item is included in nep-agr, nep-env and nep-ure
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ipt:iptwpa:jrc125220

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