IMPACTS OF 2003 CAP REFORM ON LAND PRICES: FROM THEORY TO EMPIRICAL RESULTS

Based on a graphical model we analyse the impacts of the Fischler Reform on land pricesand the capitalization of single farm payments (sfp) into land values. The model shows that ifthere are more sfp than eligible land, the capitalization ratio will not decline but rather increasedue to the inclusion of animal premiums in the sfp. We can confirm our theoretical results forcross-section data on land rental prices in Bavaria in 2005. Empirical results indicate that sfp ofthe Fischler reform are more capitalized into rental prices than the coupled direct payments ofthe time prior to the reform.