SPS Capitalization into Land Value: Generalized Propensity Score Evidence from the EU
Catholic University of Leuven (KUL) - LICOS Center for Transition Economics
Catholic University of Leuven (KUL) - Faculty of Economics and Business - LICOS Centre for Institutions and Economic Performance
European Commission. DG JRC Joint Research Center
September 1, 2011
LICOS Discussion Paper No. 293/2011
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).
Number of Pages in PDF File: 36
Keywords: decoupled subsidies, capitalization, land market, income distributional effects, selection bias
JEL Classification: Q12, Q18working papers series
Date posted: January 29, 2012
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