Farmers' Exit Decisions and Early Retirement Programs in Finland
AbstractThis paper estimates farmer decisions between three discrete occupational choices: exit and close down the farming operation (1), exit and transfer the farm to a new entrant (2), or continue farming and retain the option to exit later on (3). The farmer optimisation problem is formulated as a recursive optimal stopping problem. The unknown parameters are first estimated by a switching-type, reduced form Probit models and, then by the Simulated maximum likelihood (SML) method, controlling for serial correlation in the errors. Serial correlation in the errors is controlled for by the Geweke-Hajivassiliou-Keane (GHK) simulation technique. The results suggest that the timing and the type of farmer exit decisions respond elastically to farmer characteristics, farm characteristics, and economic environment. Early retirement programs and the level of farmer retirement benefits are predicted to play a key role in steering structural development and enhancing family farms in the Nordic agricultural sectors.
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Bibliographic InfoPaper provided by European Association of Agricultural Economists in its series 2002 International Congress, August 28-31, 2002, Zaragoza, Spain with number 24825.
Date of creation: 2002
Date of revision:
exit; entry; dynamic programming; switching-type Probit; Simulated Maximum Likelihood; Labor and Human Capital;
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