JOINT RESEARCH CENTRE

Capitalization of the Single Payment Scheme into Land Value: Generalized Propensity Score Evidence from the EU

Abstract: 
This is the first paper which empirically estimates the capitalization of the Single Payment Scheme (SPS) into land values. Although, the Single Payment Scheme (SPS) is the largest expenditure category in the EU budget, the distributional impacts between land users and land owners have not been assessed empirically yet. We employ a unique farm-level panel data set, and apply the generalized propensity score matching approach to estimate the capitalization of the SPS in EU. Our results suggest that around 6-10 percent of the total SPS are capitalized into land rents. On average in the EU, the non-farming landowners' gains from the SPS are only 4 percent. However, there is a large variation in the capitalization rate for different SPS levels, and between different Member States (3 to 94 percent).