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Capitalization of the SPS into Agricultural Land Rental Prices under Harmonization of Payments

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  • Klaiber, H. Allen
  • Salhofer, Klaus
  • Thompson, Stan

Abstract

This paper provides estimates of the capitalization of the Single Payment Scheme (SPS) payment of the Common Agricultural Policy (CAP) on agricultural land rental rates. We address problems of unobserved heterogeneity and sample selection. As the 2013 CAP Reform calls for the harmonization of SPS payments, we estimate the implications of this mandate on agricultural land rental rates over time as Germany began harmonizing payments in 2010. Using Bavarian farm level panel data we find strong capitalization effects that increase substantially in the years following 2009. On average, the marginal effect on rental rates of an additional SPS euro is 38 cents, growing over time to 57 cents as harmonization develops.

Suggested Citation

  • Klaiber, H. Allen & Salhofer, Klaus & Thompson, Stan, 2016. "Capitalization of the SPS into Agricultural Land Rental Prices under Harmonization of Payments," Discussion Papers DP-62-2016, University of Natural Resources and Life Sciences, Vienna, Department of Economics and Social Sciences, Institute for Sustainable Economic Development.
  • Handle: RePEc:zbw:inwedp:dp622016
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    5. Gianni Guastella & Daniele Moro & Paolo Sckokai & Mario Veneziani, 2018. "The Capitalisation of CAP Payments into Land Rental Prices: A Panel Sample Selection Approach," Journal of Agricultural Economics, Wiley Blackwell, vol. 69(3), pages 688-704, September.
    6. 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.
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    More about this item

    Keywords

    CAP Reform; Capitalization Effect; Sample Selection; Panel Data; German Farms;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • 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

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