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

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  • Pavel Ciaian
  • d'Artis Kancs
  • Jerzy Michalek

Abstract

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).

Suggested Citation

  • Pavel Ciaian & d'Artis Kancs & Jerzy Michalek, 2011. "SPS Capitalization into Land Value : Generalized Propensity Score Evidence from the EU," LICOS Discussion Papers 29311, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
    • Handle: RePEc:lic:licosd:29311
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    File URL: http://www.econ.kuleuven.be/licos/publications/dp/dp293.pdf
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    Cited by:

    1. 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.
    2. Ciaian, Pavel & Pokrivcak, Jan & Kancs, d'Artis, "undated". "Empirical Evidence of the Distributional Effects of the CAP in New EU Member States," Working papers 157117, Factor Markets, Centre for European Policy Studies.
    3. Olper, Alessandro & Raimondi, Valentina & Cavicchioli, Daniele & Vigani, Mauro, "undated". "Does the Common Agricultural Policy Reduce Farm Labour Migration? Panel data analysis across EU regions," Working papers 128790, Factor Markets, Centre for European Policy Studies.
    4. Olper, Alessandro & Raimondi, Valentina & Cavicchioli, Daniele & Vigani, Mauro, 2012. "Reallocation of Agricultural Labor and Farm Subsidies: Evidence From the EU Regions," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil 126645, International Association of Agricultural Economists.
    5. Mela, Giulio & Longhitano, Davide & Povellato, Andrea, "undated". "The evolution of land values in Italy. Does the influence of agricultural prices really matter?," 123rd Seminar, February 23-24, 2012, Dublin, Ireland 122479, European Association of Agricultural Economists.
    6. Guastella, Gianni & Moro, Daniele & Sckokai, Paolo & Veneziani, Mario, 2014. "The Capitalisation of Fixed per hectare Payment into Land Rental Prices: a Spatial Econometric Analysis of Regions in EU," 2014 Third Congress, June 25-27, 2014, Alghero, Italy 173093, Italian Association of Agricultural and Applied Economics (AIEAA).
    7. Góral, Justyna & Kulawik, Jacek, 2015. "Problem of capitalisation of subsidies in agriculture," Problems of Agricultural Economics / Zagadnienia Ekonomiki Rolnej 240758, Institute of Agricultural and Food Economics - National Research Institute (IAFE-NRI).
    8. 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.
    9. 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.
    10. Mela, Giulio & Longhitano, Davide & Povellato, Andrea, 2016. "Agricultural and non-agricultural determinants of Italian farmland values," 2016 Fifth AIEAA Congress, June 16-17, 2016, Bologna, Italy 242327, Italian Association of Agricultural and Applied Economics (AIEAA).

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    JEL classification:

    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy; Animal Welfare Policy

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