This paper estimates the capitalization of the Single Payment Scheme (SPS) into land values. The theory suggests that the relationship between the SPS and land rents is non-linear and discontinuous, because the SPS impact on land values depends on many factors, such as policy implementation details, market imperfections and institutional regulations. In empirical analysis we employ a unique firm-level panel data set, and apply the generalized propensity score (GPS) matching approach to estimate the capitalization of the SPS. Our results suggest that around 6 percent of the total SPS get capitalized into land rents. On average in the EU, the non-firming landowners' gains from the SPS are only 3 percent. However, there is a large variation in the capitalization rate for different SPS levels, and between Member States (between 0 and 58 percent).
decoupled subsidies capitalization land market income distributional effects selection bias