Epsilon Archive for Student Projects

Abstract

This thesis aims to investigate to which extent EU: s decoupled direct payments to farmers capitalise in higher prices of agricultural land during 20032016 and how the capitalisation degree changes at the same time. To do so, it combines the traditional net present method with a hedonic pricing model, in order to evaluate the capitalising degree of different agricultural support forms. Quantile, OLS and panel data regressions are used to determine the correlation between the explanatory variables and the dependent variable (the price of agricultural land). The used explanatory variables are supposed to capture how the structure and profitability of the agricultural sector, localisation of the agricultural land, agricultural support and demand of agricultural land for other usage than agriculture influence the price of agricultural land.

The study finds that if the decoupled direct payments increase by one % in a median municipality that is correlated with a price of agricultural land that is 0.54-0.77 % higher, ceteris paribus. The result is in line with previous research in the field, especially with Johansson & Nilsson (2012) and Kilian et al., (2012). The regressions on the higher and lower percentiles may indicate that the capitalising degree is higher in municipalities with higher prices on agricultural land.

The common agricultural policy, CAP, EU: s agricultural policy, determine regulations and the rules for agricultural support. In 2013, the CAP was reformed, and several policies was changed, but how the combination of these policy changes affect the capitalising degree was not known at that time. This study finds out that the 2013 CAP reform may have led to a decrease in the capitalising degree, from an estimated effect on 0.5 % to around 0.2 %. However, the reform was not fully implemented until 2016, and therefore should the results be carefully handled.