IMPACTS OF 2003 CAP REFORM ON LAND PRICES: FROM THEORY TO EMPIRICAL RESULTS
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Based on a graphical model we analyse the impacts of the Fischler Reform on land prices
and the capitalization of single farm payments (sfp) into land values. The model shows that if
there are more sfp than eligible land, the capitalization ratio will not decline but rather increase
due to the inclusion of animal premiums in the sfp. We can confirm our theoretical results for
cross-section data on land rental prices in Bavaria in 2005. Empirical results indicate that sfp of
the Fischler reform are more capitalized into rental prices than the coupled direct payments of
the time prior to the reform.