Abstract
This study investigates the capitalization of agricultural subsidies in South Korea by analyzing data from the Farm Household Economy Survey. Employing a fixed-effects model, our analysis reveals that a 1% increase in per-area subsidies is related with a 0.06~0.08% rise in per-area rental rates. Following the introduction of the Public-interest Direct Payment System, the capitalization effect of agricultural subsidies on rental rates showed an increment of 0.04 to 0.05%, indicating a deterioration in subsidy capitalization. This study enhances our understanding of agricultural subsidy capitalization and its dynamics post-policy reform.
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