Agricultural Support, Farm Land Values and Sectoral Adjustment: The Implications for Policy Reform

OECD, 2008

Findings

• Many policies affect rental rates and land values (tariffs, subsidies, tax preferences for farmers and landowners, environmental and zoning regulation …).
• Policies tend to affect land values more strongly than the price of other inputs (capital or labor) whose supply is more elastic.
• The degree of capitalization of support into land values is difficult to measure. It tends to be especially high for direct income support, such as the Single Farm Payment.
• Capitalization of support into land values and other asset prices creates a problem for new entrants who have to buy their way into farming.

Comment

• It is still not clear how much of the Single Farm Payment is capitalized into land values. This differs across member states, notably as a function of 1) the relationship between the number of entitlements and the number of eligible hectares and 2) the transferability of entitlements (which is restricted in some countries).