This Factor Markets Working Paper analyses the impact of increasing direct payments on land rents in six new EU member states in which agricultural subsidies largely increased as a result of their EU accession. The authors find that up to 25 eurocents per additional euro of direct payments is capitalised in land rents. In addition, the results show that capitalisation of direct payments is higher in more credit constrained markets, while capitalisation of direct payments is lower in countries where more land is used by corporate farms.
Kristine Van Herck is a PhD student at LICOS – Centre for Institutions and Economic Performance, Department of Economics, K. U. Leuven, Belgium and a Research Assistant at the Centre for European Policy Studies (CEPS), Brussels. Jo Swinnen is Senior Research Fellow at the Centre for European Policy Studies (CEPS) and Director of the LICOS Centre for Institutions and Economic Performance at K .U. Leuven. Liesbet Vranken is Assistant Professor at LICOS, K. U. Leuven, and Department of Earth and Environmental Sciences, K. U. Leuven.