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The Capitalization of Area Payment into Land Rental Prices: Micro-evidence from Italy

  • Guastella, G.
  • Moro, D.
  • Sckokai, P.
  • Veneziani, M.

This paper analyses the extent to which agricultural subsidies are capitalised into land rental price. By using Italian data at the farm level the analysis proposed in this paper innovates with respect to existing studies in different ways. Thanks to the long time span available in the FADN database it is possible to compare the two time periods, before and after the 2005 CAP reform, to test whether any change occurred as a result of the introduction of the decoupled payments scheme. In contrast to previous empirical literature, which has either focused on the unobserved farm-level heterogeneity issue or on the selectivity issue, the method proposed in this paper accounts for both simultaneously. Finally, the same method is extended to account for endogeneity of some covariates. Overall, the results in the paper confirm previous evidence, rejecting the hypothesis that agricultural payments are capitalized into land prices in both periods.

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Paper provided by Agricultural and Applied Economics Association in its series 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. with number 150617.

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Date of creation: 2013
Date of revision:
Handle: RePEc:ags:aaea13:150617
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  1. Ciaian, Pavel & Swinnen, Johan F.M., 2006. "AJAE Appendix: Land Market Imperfections and Agricultural Policy Impacts in the New EU Member States: A Partial Equilibrium Analysis," American Journal of Agricultural Economics Appendices, Agricultural and Applied Economics Association, vol. 88(4), November.
  2. Rude, James, 2007. "Production Effects of the European Union’s Single Farm Payment," Working Papers 7335, Canadian Agricultural Trade Policy Research Network.
  3. Sergio H. Lence & Ashok K. Mishra, 2003. "The Impacts of Different Farm Programs on Cash Rents," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 85(3), pages 753-761.
  4. Gunnar Breustedt & Hendrik Habermann, 2011. "The Incidence of EU Per‐Hectare Payments on Farmland Rental Rates: A Spatial Econometric Analysis of German Farm‐Level Data," Journal of Agricultural Economics, Wiley Blackwell, vol. 62(1), pages 225-243, 02.
  5. Chamberlain, Gary, 1982. "Multivariate regression models for panel data," Journal of Econometrics, Elsevier, vol. 18(1), pages 5-46, January.
  6. Kilian, Stefan & Salhofer, Klaus, 2008. "Single Payments of the CAP: Where Do the Rents Go?," Agricultural Economics Review, Greek Association of Agricultural Economists, vol. 9(2), June.
  7. Michael J. Roberts & Barrett Kirwan & Jeffrey Hopkins, 2003. "The Incidence of Government Program Payments on Agricultural Land Rents: The Challenges of Identification," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 85(3), pages 762-769.
  8. Paolo Sckokai & Daniele Moro, 2009. "Modelling the impact of the CAP Single Farm Payment on farm investment and output," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 36(3), pages 395-423, September.
  9. Barrett E. Kirwan, 2009. "The Incidence of U.S. Agricultural Subsidies on Farmland Rental Rates," Journal of Political Economy, University of Chicago Press, vol. 117(1), pages 138-164, 02.
  10. Christian Dustmann & Mar�a Engracia Rochina-Barrachina, 2007. "Selection correction in panel data models: An application to the estimation of females' wage equations," Econometrics Journal, Royal Economic Society, vol. 10(2), pages 263-293, 07.
  11. Wooldridge, Jeffrey M., 1995. "Selection corrections for panel data models under conditional mean independence assumptions," Journal of Econometrics, Elsevier, vol. 68(1), pages 115-132, July.
  12. Patton, Myles & Kostov, Philip & McErlean, Seamus & Moss, Joan, 2008. "Assessing the influence of direct payments on the rental value of agricultural land," Food Policy, Elsevier, vol. 33(5), pages 397-405, October.
  13. Anastasia Semykina & Jeffrey M. Woodridge, 2010. "Estimating Panel Data Models in the Presence of Endogeneity and Selection," Working Papers wp2010_10_01, Department of Economics, Florida State University.
  14. Pavel Ciaian & d'Artis Kancs, 2009. "The Capitalisation of Area Payments into Farmland Rents: Micro Evidence from the New EU Member States," EERI Research Paper Series EERI_RP_2009_04, Economics and Econometrics Research Institute (EERI), Brussels.
  15. Kilian, Stefan & Anton, Jesus & Roder, Norbert & Salhofer, Klaus, 2008. "Impacts Of 2003 Cap Reform On Land Prices: From Theory To Empirical Results," 109th Seminar, November 20-21, 2008, Viterbo, Italy 44808, European Association of Agricultural Economists.
  16. Mundlak, Yair, 1978. "On the Pooling of Time Series and Cross Section Data," Econometrica, Econometric Society, vol. 46(1), pages 69-85, January.
  17. Pavel Ciaian & Johan Swinnen, 2005. "Land Market Imperfections and Agricultural Policy Impacts in the New EU Member States: A Partial Equilibrium Analysis," LICOS Discussion Papers 15805, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
  18. Ekaterini Kyriazidou, 1997. "Estimation of a Panel Data Sample Selection Model," Econometrica, Econometric Society, vol. 65(6), pages 1335-1364, November.
  19. María Engracia ROCHINA-BARRACHINA, 1999. "A New Estimator for Panel Data Sample Selection Models," Annals of Economics and Statistics, GENES, issue 55-56, pages 153-181.
  20. repec:tuu:papers:012007 is not listed on IDEAS
  21. James Rude, 2008. "Production Effects of the European Union's Single Farm Payment," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 56(4), pages 457-471, December.
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