The capitalization of area payments into land rental prices: a panel sample selection approach
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Previous empirical literature suggests that agricultural subsidies are capitalized into
farmland rents and that the introduction of the 2003 decoupling reform of the EU Common
Agricultural Policy, attaching the subsidy to land only, might have even extended the
phenomenon of capitalization. Employing the FADN dataset for Italy we investigate this
issue using methodologies accounting for selectivity, endogeneity and individual
heterogeneity simultaneously. The evidence suggests that selectivity bias causes
inconsistent estimation of parameters and wrong inference. Results reveal instead that, in
Italy, there is no incidence of both coupled and decoupled payments.