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Adrian Sadłowski
Faculty of Social and Economic Sciences, Cardinal Stefan Wyszynski University in Warsaw, Wóycickiego 1/3, 01–938 Warsaw
Poland
https://orcid.org/0000-0003-2969-4926
Vol 34 No 3 (2025), Articles, pages 10141
DOI: https://doi.org/10.15304/rge.34.3.10141
Submitted: 25-09-2024 Accepted: 09-04-2025 Published: 23-04-2025
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Abstract

Area payments are a key instrument of the European Union’s Common Agricultural Policy. However, their effectiveness as a tool for supporting farmers’ incomes is weakened by the phenomenon of capitalisation. The aim of this study is to identify the mechanism by which area payments stimulate inputs of agriculture production factors and to examine how subsidies granted in the form of area payments are transformed into remuneration for production factors. The research methodology used includes economic modelling and marginal analysis. It is demonstrated that area payments change the allocation of resources compared to the allocation driven by the market mechanism (resulting in a greater engagement of production factors in agricultural production than would be the case in the absence these subsidies) and also affect the level and structure of the remuneration for production factors in agriculture. A theoretical decomposition of the remuneration of production factors into income from non-land production factors and land rent has been carried out.