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Factors Affecting Variability in Farm and Off-farm Income

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  • Poon, Kenneth
  • Alfons, Weersink

Abstract

The purpose of this paper is to examine the factors affecting the relative variability in farm and off-farm income for Canadian farm operators. Previous attempts have been limited by the lack of available data combining both farm and off-farm income levels for farm operations over time. Statistic Canada’s Farm Micro-Longtidinal Dataset of 17,000 farm operators from 2001 to 2006 allowed such an analysis. The coefficient of variation (CV) in farm income is significantly greater than that for off-farm income but both measures are inversely related to the permanence of the income source to the operation. The greater the reliance on farm income and the greater the labour demand within the farm, the lower (greater) the relative variability in farm (off-farm) income. Larger commercial operations tend to experience larger farm income volatility either because they are less risk averse and/or have the ability to manage more risk. Diversification and off-farm employment appear to be substitute for risk management strategies for commercial operations. Pension and lifestyle farms have lower coefficient of variation for both farm and off-farm income compared to business-focused farms since they are possibly more risk averse and benefit from a permanent stream of off-farm revenue. Government payments have mixed effects on the relative variability of both income sources, which may be due the lag between the time of the income reduction and the time at which the aid is received.

Suggested Citation

  • Poon, Kenneth & Alfons, Weersink, 2011. "Factors Affecting Variability in Farm and Off-farm Income," Working Papers 102064, Structure and Performance of Agriculture and Agri-products Industry (SPAA).
    • Handle: RePEc:ags:spaawp:102064
    DOI: 10.22004/ag.econ.102064
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    References listed on IDEAS

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    1. O'Donoghue, Erik J. & Hoppe, Robert A. & Banker, David E. & Korb, Penni, 2009. "Exploring Alternative Farm Definitions: Implications for Agricultural Statistics and Program Eligibility," Economic Information Bulletin 291954, United States Department of Agriculture, Economic Research Service.
    2. Jette-Nantel, Simon & Freshwater, David & Beaulieu, Martin S. & Katchova, Ani L., 2010. "Farm Income Variability and Off-Farm Diversification in Canadian Agriculture," 2010 Annual Meeting, February 6-9, 2010, Orlando, Florida 56497, Southern Agricultural Economics Association.
    3. Euan Phimister & Esperanza Vera-Toscano & Alfons Weersink, 2002. "Female Participation and Labor Market Attachment in Rural Canada," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 84(1), pages 210-221.
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