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Farm household risk balancing in Switzerland and Belgium: an econometric and survey approach

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  • de Mey, Yann
  • Wauters, Erwin
  • Lips, Markus
  • Schmid, Dirk
  • Vancauteren, Mark
  • Van Passel, Steven

Abstract

This paper presents the first empirical evidence on farm household risk balancing behavior, i.e., making strategic off-farm decisions in response to changes in expected business risk. Firstly, using survey data combined with Flemish FADN data, we construct a psychometric household risk balancing scale and explore what determines the differences in scores for different farm households. Secondly, using Swiss FADN data, we estimate an econometric model that analyzes how farm households jointly alter their levels of debt, off-farm income and consumption. The evidence suggests that in response to exogenous changes in expected business risk, farm households make strategic off-farm decisions. Our study demonstrates that part of the behavioral risk response of farm households is ignored when focusing solely on farm-level analyses and illustrates the relevance of the extended household risk balancing framework.

Suggested Citation

  • de Mey, Yann & Wauters, Erwin & Lips, Markus & Schmid, Dirk & Vancauteren, Mark & Van Passel, Steven, 2014. "Farm household risk balancing in Switzerland and Belgium: an econometric and survey approach," 2014 International Congress, August 26-29, 2014, Ljubljana, Slovenia 186678, European Association of Agricultural Economists.
    • Handle: RePEc:ags:eaae14:186678
    DOI: 10.22004/ag.econ.186678
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