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Annual Review of Resource Economics

Volume 13, 2021

The Capitalization of Agricultural Subsidies into Land Prices

Abstract

We review the recent theoretical and empirical literature on the capitalization of agricultural subsidies into land prices. The theoretical literature predicts that agricultural subsidies are capitalized into land prices when land supply is inelastic and land markets function well. The share of capitalized subsidies significantly depends on the implementation of farm subsidies, local land-market institutions, rural market imperfections, and spatial effects. Most empirical studies have shown that agricultural subsidies are only partially capitalized into land prices, estimating that decoupled payments and land-based subsidies exhibit higher capitalization than coupled payments and nonland-based subsidies, respectively. However, estimated capitalization rates vary widely across studies largely because of data availability and identification challenges.

Keyword(s): agricultural subsidies, capitalization, coupled and decoupled payments, JEL Q11, JEL Q12, JEL Q18, land market, land prices, land rents, land values
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2021-10-05
2025-06-21
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The Capitalization of Agricultural Subsidies into Land Prices
Annual Review of Resource Economics 13, 17 (2021); https://doi.org/10.1146/annurev-resource-102020-100625
/content/journals/10.1146/annurev-resource-102020-100625
/content/journals/10.1146/annurev-resource-102020-100625
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