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The Capitalization of Area Payments into Farmland Rents: Micro Evidence from the New EU Member States

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  • Pavel Ciaian
  • d’Artis Kancs

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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Suggested Citation

  • Pavel Ciaian & d’Artis Kancs, 2012. "The Capitalization of Area Payments into Farmland Rents: Micro Evidence from the New EU Member States," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 60(4), pages 517-540, December.
    • Handle: RePEc:bla:canjag:v:60:y:2012:i:4:p:517-540
    DOI: j.1744-7976.2012.01256.x
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    File URL: http://hdl.handle.net/10.1111/j.1744-7976.2012.01256.x
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    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • 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; Agriculture and Environment
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy; Animal Welfare Policy
    • P32 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - Collectives; Communes; Agricultural Institutions
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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