Capitalization of direct payments in land rents: evidence from New EU Member States

This paper analyzes the impact of increasing direct payments (DPs) on land rents in six New European Union (EU) Member States. In these countries, agricultural subsidies largely increased as a result of EU accession. We find that up to 25 percent of DPs are capitalized in land rents. In addition, the results show that capitalization of DPs is higher in more credit-constrained markets, while capitalization of DPs is lower in countries where more land is used by corporate farms, reflecting a stronger bargaining position of corporate farms and unequal access to subsidies in these countries.