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The Capitalisation of Area Payments into Farmland Rents: Theory and Evidence from the New EU Member States

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Author Info
Pavel Ciaian
d'Artis Kancs

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Abstract

This study investigates the impact of the SAPS (Simplified Area Payment Scheme) on rental land values in seven New EU Member States (NMS). Using the FADN farm level panel data with 20,930 observations from 2004 and 2005 we are able to control for unobserved heterogeneity, simultaneity, and omitted variable bias, which often distort the incidence measures. According to our results, the SAPS has a positive and statistically significant impact on land rents in the NMS. However, the effect is smaller than theoretically predicted. Land rents capture only 0.19 of the marginal Euro of the SAPS. Taking into account the level of land renting in the NMS, around 10 percent of the total value of SAPS payments benefit non-farming land owners through higher farmland rental prices. Because the share of rented land is higher for corporate than for individual farms, family farms will likely benefit more from the SAPS than corporate farms.

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Publisher Info
Paper provided by Economics and Econometrics Research Institute (EERI) in its series EERI Research Paper Series with number EERI_RP_2009_04.

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Length: 38 pages
Date of creation: 04 Feb 2009
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Handle: RePEc:eei:rpaper:eeri_rp_2009_04

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Related research
Keywords: Area payments; land capitalisation; land market.;

Find related papers by JEL classification:
Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices
Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
Q15 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Land Ownership and Tenure; Land Reform; Land Use; Irrigation
Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy
P32 - Economic Systems - - Socialist Institutions and Their Transitions - - - Collectives; Communes; Agricultural Institutions

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    Other versions:
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    Other versions:
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    • Livanis, Grigorios & Moss, Charles B. & Breneman, Vincent E. & Nehring, Richard F., 2005. "Urban Sprawl and Farmland Prices," Working Papers 15657, University of Florida, International Agricultural Trade and Policy Center. [Downloadable!]
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