2017年-CEPS欧洲政策研究中心_An_Analysis_of_the_Capitalisation_of_CAP_Payments_into_Land_Rental_Rates_in_Ireland_27页_683kb

Summary of "An Analysis of the Capitalisation of CAP Payments into Land Rental Rates in Ireland"

Core Content

This paper examines how agricultural subsidies, specifically under the Common Agricultural Policy (CAP), are capitalised into land rental rates in Ireland. It uses a dynamic rental equation estimated with a two-step System GMM method to account for endogeneity and expectation errors. The study spans the period from 2000 to 2009, covering both the pre-decoupling and post-decoupling phases of CAP reforms.

Main Points

• Subsidy Capitalisation: Prior to decoupling, Pillar 1 subsidies were highly capitalised into Irish agricultural rents. The long-run capitalisation rates were between 58 to 80 cents per euro of subsidies.

• Decoupling Impact: After the 2003 Fischler reforms, which introduced decoupled payments, the capitalisation of subsidies into rents declined. For dairy and tillage farms, the long-run capitalisation decreased to 41 and 53 cents per euro, respectively. For cattle farms, it dropped to 21 cents, and for sheep farms, to 35 cents, though the latter was not statistically significant.

• Institutional Factors: The short-term nature of Irish agricultural rental contracts (typically 11 months) and the consolidation option introduced by the Fischler reforms allowed farmers to move entitlements from expired rental contracts to other land, reducing the capitalisation of subsidies into rents.

• Methodology: The study employs a dynamic linear model with System GMM estimation to address endogeneity and expectation errors. This approach is particularly suited to capturing the inertia in agricultural rents, which is a key finding of the paper.

• Inertia in Rents: Agricultural rents in Ireland exhibit a high degree of inertia, meaning that the impact of past subsidies on current rents persists over time. This inertia is likely due to the short-term rental contracts and the flexibility provided by the CAP reforms.

• Policy Implications: The capitalisation of subsidies into land rents affects the transfer efficiency of agricultural policy. If a large portion of subsidies is captured by landowners, the intended recipients (farmers) may not benefit as much from the policy. This can lead to inefficiencies in the agricultural sector, especially for smaller farms that may not be able to access the capitalised subsidies.

Key Information

• Pre-decoupling Capitalisation:

  • Dairy farms: 77 cents per euro of support
  • Sheep farms: 67 cents per euro of support
  • Tillage farms: 90 cents per euro of support
  • Cattle farms: 54 cents per euro of support (not statistically significant)

• Post-decoupling Capitalisation:

  • Dairy farms: 41 cents per euro of support
  • Tillage farms: 53 cents per euro of support
  • Cattle farms: 21 cents per euro of support (statistically significant)
  • Sheep farms: 35 cents per euro of support (not statistically significant)

• Institutional Context:

  • Most Irish farms use the conacre system, which involves short-term land rental agreements.
  • The consolidation option allows farmers to transfer entitlements from expired contracts to other land, reducing the capitalisation of subsidies into rents.

• Comparative Insights:

  • The paper compares findings with those from the US and other EU countries, highlighting differences in subsidy capitalisation due to varying institutional arrangements and contract durations.

• Methodological Considerations:

  • The use of a dynamic model with System GMM estimation allows for a more accurate assessment of the capitalisation of subsidies into rents.
  • The study acknowledges the importance of accounting for dynamics and inertia in rental decisions when analysing the capitalisation of subsidies.

Conclusion

The research underscores the importance of institutional details in determining the extent of subsidy capitalisation into land rents. It highlights the significant impact of the 2003 CAP reforms on the capitalisation rates in Ireland and suggests that the short-term nature of land rental contracts and the consolidation option play a crucial role in this process. The findings also point to the need for careful consideration of dynamic effects and the potential for policy reforms to influence the transfer efficiency of subsidies in the agricultural sector.