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SPS Capitalization into Land Value : Generalized Propensity Score Evidence from the EU

  • Pavel Ciaian
  • d'Artis Kancs
  • Jerzy Michalek

This paper estimates the capitalization of the Single Payment Scheme (SPS) into land values. The theory suggests that the relationship between the SPS and land rents is non-linear and discontinuous, because the SPS impact on land values depends on many factors, such as policy implementation details, market imperfections and institutional regulations. In empirical analysis we employ a unique farm-level panel data set, and apply the generalized propensity score (GPS) matching approach to estimate the capitalization of the SPS. Our results suggest that around 6 percent of the total SPS get capitalized into land rents. On average in the EU, the non-farming landowners' gains from the SPS are only 3 percent. However, there is a large variation in the capitalization rate for different SPS levels, and between Member States (between 0 and 58 percent).

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File URL: http://www.econ.kuleuven.be/licos/publications/dp/dp293.pdf
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Paper provided by LICOS - Centre for Institutions and Economic Performance, KU Leuven in its series LICOS Discussion Papers with number 29311.

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Date of creation: 2011
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Handle: RePEc:lic:licosd:29311
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