Well functioning factor markets are a crucial condition for the competitiveness and growth of agriculture and for rural development.
Rural land market
Rural land markets have always been, for obvious reasons, very important for EU agriculture. However, since the MacSharry reforms in the early 1990s, much of the CAP payments are linked to land use. The 2003 CAP reform reformed the payments but there is still an important link to the land markets. Therefore, given the importance of the relationship between CAP payments and land markets, an important focus of the Factor Markets project will be on understanding and predicting the impact of the SPS on rural land markets, including both sales and lease markets.
- The variety of land market regulations will be taken into account. As all factor and commodity markets, the EU markets for agricultural land are subject to institutional regulations, both national and EU-wide. The land market regulations are extremely diverse across and between the EU Member States and Candidate Countries, as is the agricultural land itself. In order to fully understand their impact on land market outcomes, all key rural land market regulations will be accounted for, both on land sales and rental markets.
- In order to correctly model policy impacts on land markets it is important to integrate both first and second order (direct and indirect) effects. The Factor Markets project will contribute to the growing impact assessment literature by accounting for both direct and indirect impacts of CAP through induced adjustments on land markets.
- A key question is how to model and measure the impact of the Single Payment Scheme on the land markets. The Factor Markets project will contribute to the existing literature with a particular focus on the impact of the SPS on land markets.
- Studying the interaction between CAP payments and the EU land market will allow to draw conclusions on the differential impact in terms of capitalization between coupled and decoupled subsidies. The Factor Markets project will shed light into the extent to which different farm support programmes (coupled and decoupled) are capitalised in farmland prices by measuring the impacts on land markets and prices of most important CAP measures which have been in force in the last two decades.
- For the Factor Markets project, a set of existing models of European agriculture (LEITAP, CAPRI and AgriPoliS) will be further developed as a major integrative and innovative component of the study.