IDEAS home Printed from https://ideas.repec.org/p/ipt/iptwpa/jrc101619.html
   My bibliography  Save this paper

The Impact of the 2013 CAP Reform on the Decoupled Payments' Capitalization into Land Values

Author

Abstract

Decoupled direct payments were introduced in the European Union (EU) by the 2003 CAP reform in form of the Single Payment Scheme (SPS) and the Single Area Payment System (SAPS). The 2013 CAP reform changed both the implementation of decoupled payments as well as its budget. We assess the possible effects of the 2013 CAP reform on the capitalization of decoupled payments in land rental values. Our estimates suggest that the CAP reform leads to an increase in the capitalization of decoupled payments by additional 16 cents for each EUR of decoupled payments relative to the pre-reform situation. However, there is a relatively large variation in the reform effects between MS particularly between Old Member States (OMS) and New MS (NMS). In NMS the capitalization rate slightly reduces from 76% in the pre-reform period to 72% in the post-reform period. Although, the rate is significantly lower in OMS, it almost doubles (from 20% to 39%) due to the reform. The main source of the post-reform capitalization in the EU are the entitlement stock changes accounting for 19% of total post-reform capitalization level, followed by the internal convergence of payments with 18%, the budget change (including external convergence) with 1%, and the differentiation of payments (redistributive payment) with -7%. Overall, our estimates suggest that on average in the EU, the non-farming landowners’ policy gains are 25% of total decoupled payments in the post-reform period compared to 17% in the pre-reform period.

Suggested Citation

  • Pavel Ciaian & d'Artis Kancs & Maria Espinosa, 2016. "The Impact of the 2013 CAP Reform on the Decoupled Payments' Capitalization into Land Values," JRC Working Papers JRC101619, Joint Research Centre (Seville site).
  • Handle: RePEc:ipt:iptwpa:jrc101619
    as

    Download full text from publisher

    File URL: http://publications.jrc.ec.europa.eu/repository/handle/JRC101619
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Joel Karlsson & Pia Nilsson, 2014. "Capitalisation of Single Farm Payment on farm price: an analysis of Swedish farm prices using farm-level data," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 41(2), pages 279-300.
    2. repec:bla:jageco:v:68:y:2017:i:3:p:710-726 is not listed on IDEAS
    3. Mundlak, Yair & Butzer, Rita & Larson, Donald F., 2012. "Heterogeneous technology and panel data: The case of the agricultural production function," Journal of Development Economics, Elsevier, vol. 99(1), pages 139-149.
    4. Steve McCorriston & Ian M. Sheldon, 1991. "Government Intervention in Imperfectly Competitive Agricultural Input Markets," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 73(3), pages 621-632.
    5. Petrick, Martin & Kloss, Mathias, 2013. "Identifying Factor Productivity from Micro-data: The case of EU agriculture," Working papers 144004, Factor Markets, Centre for European Policy Studies.
    6. Van Herck, Kristine & Vranken, Liesbet, 2012. "Direct Payments and Land Rents: Evidence from New Member States," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil 126777, International Association of Agricultural Economists.
    7. Sheldon, Ian M. & Pick, Daniel H. & McCorriston, Steve, 2001. "Export Subsidies And Profit-Shifting In Vertical Markets," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 26(1), pages 1-17, July.
    8. Pavel Ciaian & d’Artis Kancs & Johan Swinnen, 2010. "EU Land Markets and the Common Agricultural Policy," Journal of Economics and Econometrics, Economics and Econometrics Society, vol. 53(3), pages 1-31.
    9. Pavel Ciaian & Johan F.M. Swinnen, 2009. "Credit Market Imperfections and the Distribution of Policy Rents," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(4), pages 1124-1139.
    10. Bruce Gardner, 1983. "Efficient Redistribution through Commodity Markets," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 65(2), pages 225-234.
    11. Pavel Ciaian & d'Artis Kancs & Jo Swinnen, 2008. "Static and Dynamic Distributional Effects of Decoupled Payments," Journal of Economics and Econometrics, Economics and Econometrics Society, vol. 51(2), pages 20-47.
    12. Paul Feichtinger & Klaus Salhofer, 2016. "The Fischler Reform of the Common Agricultural Policy and Agricultural Land Prices," Land Economics, University of Wisconsin Press, vol. 92(3), pages 411-432.
    13. 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, February.
    14. 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).
    15. Marion Desquilbet & Hervé Guyomard, 2002. "Taxes and Subsidies in Vertically Related Markets," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 84(4), pages 1033-1041.
    16. Jerzy Michalek & Pavel Ciaian & d’Artis Kancs, 2014. "Capitalization of the Single Payment Scheme into Land Value: Generalized Propensity Score Evidence from the European Union," Land Economics, University of Wisconsin Press, vol. 90(2), pages 260-289.
    17. Stephen O'Neill & Kevin Hanrahan, 2016. "The capitalization of coupled and decoupled CAP payments into land rental rates," Agricultural Economics, International Association of Agricultural Economists, vol. 47(3), pages 285-294, May.
    18. 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), pages 1-10, November.
    19. Guastella, Gianni & Moro, Daniele & Sckokai, Paolo & Veneziani, Mario, 2014. "The capitalization of area payments into land rental prices: a panel sample selection approach," 2014 International Congress, August 26-29, 2014, Ljubljana, Slovenia 186375, European Association of Agricultural Economists.
    20. Alexander Gocht & Wolfgang Britz & Pavel Ciaian & Sergio Gomez y Paloma, 2013. "Farm Type Effects of an EU-wide Direct Payment Harmonisation," Journal of Agricultural Economics, Wiley Blackwell, vol. 64(1), pages 1-32, February.
    21. Paolo Sckokai & Daniele Moro, 2006. "Modeling the Reforms of the Common Agricultural Policy for Arable Crops under Uncertainty," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 88(1), pages 43-56.
    22. Courleux, Frédéric & Guyomard, Hervé & Levert, Fabrice & Piet, Laurent, 2008. "How the EU Single Farm Payment should be modelled: lump-sum transfers, area payments or… what else?," Working Papers 211014, Institut National de la recherche Agronomique (INRA), Departement Sciences Sociales, Agriculture et Alimentation, Espace et Environnement (SAE2).
    23. 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.
    24. 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.
    25. Guastella, G. & Moro, D. & Sckokai, P. & Veneziani, M., 2013. "The Capitalization of Area Payment into Land Rental Prices: Evidence from Italy," 2013: Productivity and Its Impacts on Global Trade, June 2-4, 2013. Seville, Spain 152263, International Agricultural Trade Research Consortium.
    26. H. Allen Klaiber & Klaus Salhofer & Stanley R. Thompson, 2017. "Capitalisation of the SPS into Agricultural Land Rental Prices under Harmonisation of Payments," Journal of Agricultural Economics, Wiley Blackwell, vol. 68(3), pages 710-726, September.
    27. Pavel Ciaian & D'Artis Kancs & Johan Swinnen, 2014. "The Impact of the 2013 Reform of the Common Agricultural Policy on Land Capitalization in the European Union," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 36(4), pages 643-673.
    28. Kamel Louhichi & Pavel Ciaian & Maria Espinosa & Liesbeth Colen & Angel Perni & Sergio Gomez y Paloma, 2015. "Individual Farm Model for Common Agricultural Policy Analysis (IFM-CAP)," JRC Working Papers JRC92574, Joint Research Centre (Seville site).
    29. 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, February.
    30. Ciaian, Pavel & Kancs, d'Artis, 2011. "The Impact of Market Imperfections on Heterogeneous Firm Output, Productivity, and Profit," Journal of Rural Cooperation, Hebrew University, Center for Agricultural Economic Research, vol. 39(1), pages 1-24.
    31. Joe Dewbre & Jesús Antón & Wyatt Thompton, 2001. "The Transfer Efficiency and Trade Effects of Direct Payments," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(5), pages 1204-1214.
    32. Vanni, Francesco & Cardillo, Concetta, 2013. "The effects of CAP greening on Italian agriculture," Politica Agricola Internazionale - International Agricultural Policy, Edizioni L'Informatore Agrario, issue 3, September.
    33. Salhofer, Klaus & Schmid, Erwin, 2004. "Distributive leakages of agricultural support: some empirical evidence," Agricultural Economics, Blackwell, vol. 30(1), pages 51-62, January.
    34. Pia Nilsson & Sara Johansson, 2013. "Location determinants of agricultural land prices," Review of Regional Research: Jahrbuch für Regionalwissenschaft, Springer;Gesellschaft für Regionalforschung (GfR), vol. 33(1), pages 1-21, February.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. repec:gam:jsusta:v:11:y:2019:i:12:p:3462-:d:242522 is not listed on IDEAS
    2. Pavel Ciaian & d'Artis Kancs & Dusan Drabik, 2016. "Land Markets in Europe: Institutions and Market Outcomes," EERI Research Paper Series EERI RP 2016/10, Economics and Econometrics Research Institute (EERI), Brussels.
    3. Ciaian, Pavel & Espinosa, Maria & Louhichi, Kamel & Perni, Angel & Gomez y Paloma, Sergio, 2018. "Farm level impacts of abolishing the CAP direct payments: An assessment using the IFM-CAP model," 162nd Seminar, April 26-27, 2018, Budapest, Hungary 272087, European Association of Agricultural Economists.
    4. Ciliberti, Stefano & Frascarelli, Angelo, 2018. "Does the basic payment efficiently enhance farm incomes? Evidences from Italy," 162nd Seminar, April 26-27, 2018, Budapest, Hungary 271957, European Association of Agricultural Economists.

    More about this item

    Keywords

    Capitalization; Decoupled subsidies; CAP reform; Land market; Land prices; Land rents; SAPS; SPS; EU;

    JEL classification:

    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ipt:iptwpa:jrc101619. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Publication Officer). General contact details of provider: http://edirc.repec.org/data/ipjrces.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.