Abstract
This paper examines the impact of agricultural subsidies on rental rates for grassland. In theory, the capitalization of subsidies into grassland rents has become increasingly important as a result of the decoupling of direct payments from production in 2005. The focus is on the pass-through of both coupled and decoupled direct payments on grassland rentals in Western Germany. The empirical investigation is based upon farm-level data of grassland rental rates from the six farm census surveys carried out between 2001 and 2013. The results of spatial econometric models show that landlords of grassland have benefited strongly from the decoupling of direct payments. For the period prior to the decoupling of direct payments, the estimates point to low capitalisation of the livestock payments into grassland rentals. For the period after decoupling, the estimations reveal a significant pass-through of direct payments to landowners, with the marginal capitalisation increasing over time. At the end of the observation period, after regional standardisation of the payments, the estimates show marginal capitalisation rates of 87–94 cents per additional premium euro, suggesting almost complete capitalisation of the funding into the rental price for grassland.
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Annex
Specification of the variables used.
Variable | Definition |
---|---|
New rental_grassland | Rental price for within the last two years newly rented grassland in €/ha |
SGM_dairy cattle | Standard gross margin dairy cattle per ha UAA (3-year average before data collection, incl. animal payment up to 2005, single farm-level) |
SGM_grazing cattle | Standard gross margin cattle (exc. dairy cattle), horses, sheep per ha UAA (3-year average before data collection, incl. animal payment up to 2005, single farm-level) |
Total payment | Regional payment in euro/ha for 2013/estimates for the regional payment in euro/ha for 2005–2010 (modulation adjustment) (federal state-level) |
Basic payment | Standard regional basic payment for grassland in euro/ha (modulation adjustment) in the year of data collection (federal state-level) |
SFP_Dairy cattle per ha | Avg. number eligible animals 2005 per ha UAA 2005 at county level (proxy for single farm payment) |
SFP_Suckler cows per ha | Avg. number eligible animals 2001 per ha UAA 2005 at county level (proxy for single farm payment) |
SFP_Bulls per ha | Avg. number eligible animals 2001 per ha UAA 2005 at county level (proxy for single farm payment) |
SFP_Ewes per ha | Avg. number eligible animals 2001 per ha UAA 2005 at county level (proxy for single farm payment) |
UAA_ha | Utilisable agricultural area in ha (single farm-level) |
Soil quality_10 km | Avg. soil quality index (Bodenzahl) per are within a 10 km radius of the centre of the municipality in which the farm is located |
Rainfall | Avg. annual rainfall at the weather station work closest to the farm’s municipality in mm in the period 1981–2010 |
Temperature | Avg. temperature at the weather station work closest to the farm’s municipality in degrees Celsius in the period 1981–2010 |
ha_grassland new rental | Within the last two years newly rented grassland in ha (single farm-level) |
Grassland share | Share of grassland used (meadows, pastures, mountain pastures and hardscrabble permanent grassland) on the UAA (single farm-level) |
Rental share | Share of land rented out by other landowners on the UAA (single farm-level) |
Workers per ha | Family labour and permanent and non-permanent employees per ha UAA (single farm-level) |
Part-time | Dummy 0=none/low outside income/company, 1=individual firm with high outside income (single farm-level) |
Cattle density_10 km | Avg. cattle density in AU/ha of the farms within a 10 km radius of the centre of the municipality in which the farm is located |
Pig poultry density_10 km | Avg. pig and poultry density in AU/ha of the farms within a 10 km radius of the centre of the municipality in which the farm is located |
Biogas density_10 km | kW inst. elect. power per km2 in the year of data collection within a 10 km radius of the centre of the municipality in which the farm is located |
Farms_10 km | Number of other farms within a 10 km radius of the centre of the municipality in which the farm is located |
UAA_farms_10 km | Avg. farm size in ha UAA of other farms within a 10 km radius of the centre of the municipality in which the farm is located |
Pop. density_10 km | Population density in inhabitants/km2 within a 10 km radius of the centre of the municipality in which the farm is located |
Region_North | Dummy variable=1 for farms in Schleswig-Holstein, Hamburg, Lower Saxony, Bremen and North Rhine-Westphalia |
Region_South | Dummy variable=1 for farms in Bavaria and Baden-Württemberg |
Source: own illustration.
Article note
This article is part of the special issue “Econometric studies with integrated micro-data from German official statistics” published in the Journal of Economics and Statistics.
© 2018 Oldenbourg Wissenschaftsverlag GmbH, Published by De Gruyter Oldenbourg, Berlin/Boston
Artikel in diesem Heft
- Frontmatter
- Editorial
- Econometric Studies with Integrated Micro-data from German Official Statistics
- Original Articles
- Public Investment Subsidies and Firm Performance – Evidence from Germany
- The Incidence of Agricultural Subsidies on Rental Rates for Grassland
- Active on Many Foreign Markets: A Portrait of German Multi-market Exporters and Importers from Manufacturing Industries
Artikel in diesem Heft
- Frontmatter
- Editorial
- Econometric Studies with Integrated Micro-data from German Official Statistics
- Original Articles
- Public Investment Subsidies and Firm Performance – Evidence from Germany
- The Incidence of Agricultural Subsidies on Rental Rates for Grassland
- Active on Many Foreign Markets: A Portrait of German Multi-market Exporters and Importers from Manufacturing Industries