The Impact of the 2013 CAP Reform on the Decoupled Payments’ Capitalisation into Land Values

Abstract

We assess the effects of the 2013 CAP reform on the capitalisation of decoupled payments in land rental values. Our estimates suggest that the reform leads to an increase in the capitalisation of decoupled payments by an additional 18 cents for each Euro of decoupled payments relative to the pre-reform situation. However, there is an important variation in the reform effects between Member States (MS) particularly between Old Member States (OMS) and New MS (NMS). In NMS, the capitalisation rate slightly reduces from 83% in the pre-reform period to 79% in the post-reform period. Although, the rate is significantly lower in OMS, it doubles (from 21% to 43%) due to the reform. The main sources of the post-reform capitalisation in the European Union (EU) are the pre-reform capitalisation accounting for 69% of the total post-reform capitalisation, followed by the entitlement stock change with 19%, by the internal convergence of payments with 18%, the budget change (including external convergence) with 1%, and the differentiation of payments (redistributive payment) with −7%. Overall, our estimates suggest that on average in the EU, the non-farming landowners’ policy gains are 27% of the total decoupled payments in the post-reform period compared to 18% in the pre-reform period.