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Off-Farm Work and Economic Performance: Comparing Crop and Livestock Farms

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  • Fernandez-Cornejo, Jorge
  • Nehring, Richard F.
  • Erickson, Kenneth W.
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    Abstract

    This paper examines how off-farm work affects the economic performance of crop and (selected) livestock farms. It estimates returns to scale and technical efficiency following an input distance function approach and compares the relative performance of dairy and corn farm operator households with and without off-farm work. We use farm-level data from the USDA's ARMS survey for 1996-2005. The impact of off-farm work on scale and technical efficiency is examined from two viewpoints: first, the effect of off-farm work on the scale and technical efficiency of the farm business in the production of traditional commodities (farm-level perspective); second, the impact of off-farm work on scale and technical efficiency at the household level, considering both on-farm and off-farm activities. We find that off-farm income boosts scale efficiency on corn farms but decreases scale and dairy farms. The impact of off farm income on technical efficiency is small when using the household approach. However, dairy farmers that rely on off-farm income have lower technical efficiency than dairy farmers that do not rely on off farm income in both the farm and household models, while the reverse is true for corn farms. Finally, we find that dairy farms relying on off farm income have significantly lower returns on assets, while again the opposite is true for corn farms.

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    Bibliographic Info

    Paper provided by American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association) in its series 2007 Annual Meeting, July 29-August 1, 2007, Portland, Oregon TN with number 9904.

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    Date of creation: 2007
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    Handle: RePEc:ags:aaea07:9904

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    Keywords: Farm Management; Productivity Analysis;

    References

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    1. Herriges, Joseph A. & Secchi, Silvia & Babcock, Bruce A., 2003. "Living with Hogs in Iowa: The Impact of Livestock Facilities on Rural Residential Property Values," Staff General Research Papers 10683, Iowa State University, Department of Economics.
    2. Aigner, Dennis & Lovell, C. A. Knox & Schmidt, Peter, 1977. "Formulation and estimation of stochastic frontier production function models," Journal of Econometrics, Elsevier, vol. 6(1), pages 21-37, July.
    3. Mishra, Ashok K. & El-Osta, Hisham S. & Morehart, Mitchell J. & Johnson, James D. & Hopkins, Jeffrey W., 2002. "Income, Wealth, And The Economic Well-Being Of Farm Households," Agricultural Economics Reports 33967, United States Department of Agriculture, Economic Research Service.
    4. Boisvert, Richard N., 2002. "Analysis of a Re-Focused Agricultural Policy within a Farm-Household Framework Some Data Requirements," Workshop on the Farm Household-Firm Unit: Its Importance in Agriculture and Implications for Statistics, April 12-13, 2002, Wye Campus,Imperial College 15727, International Agricultural Policy Reform and Adjustment Project (IAPRAP).
    5. Kumbhakar, Subal C & Biswas, Basudeb & Bailey, DeeVon, 1989. "A Study of Economic Efficiency of Utah Dairy Farmers: A System Approach," The Review of Economics and Statistics, MIT Press, vol. 71(4), pages 595-604, November.
    6. Vince Breneman, 2006. "Urban Influence on Costs of Production in the Corn Belt," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 88(4), pages 930-946.
    7. Nigel Key & William McBride, 2003. "Production Contracts and Productivity in the U.S. Hog Sector," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 85(1), pages 121-133.
    8. Catherine J. Morrison Paul & Richard Nehring & David Banker, 2004. "Productivity, Economies, and Efficiency in U.S. Agriculture: A Look at Contracts," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 86(5), pages 1308-1314.
    9. Fernandez-Cornejo, Jorge & Mishra, Ashok K. & Nehring, Richard F. & Hendricks, Chad & Southern, Malaya & Gregory, Alexandra, 2007. "Off-Farm Income, Technology Adoption, And Farm Economic Performance," Economic Research Report 7234, United States Department of Agriculture, Economic Research Service.
    10. Sharma, Khem R. & Leung, PingSun & Zaleski, Halina M., 1999. "Technical, allocative and economic efficiencies in swine production in Hawaii: a comparison of parametric and nonparametric approaches," Agricultural Economics, Blackwell, vol. 20(1), pages 23-35, January.
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