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The Consumption Behaviour of Farmers: a review of the evidence

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  • O'Mara, L. Paul
  • Mullen, John D.
  • Powell, Roy A.
  • Reece, B.F.

Abstract

Over recent years there has been marked instability in incomes earned from farming. The instability, which affects the economy generally, is transmitted partly through the consumption spending of farmers. A conventional view of the short-run marginal propensity to consume of farmers, supported by some analyses of aggregate data, is that it is zero. It is argued that this view is implausible on theoretical grounds, that the analysis giving rise to this view used aggregate data which contained serious flaws, and that evidence from micro-studies and other macro level analyses present a more realistic assessment that the short-run mpc of farmers is not zero but likely to be lower than that of non-farmers. A non-zero mpc has implications for how the farm sector interacts with the rest of the economy and is incorporated in models of the economy.

Suggested Citation

  • O'Mara, L. Paul & Mullen, John D. & Powell, Roy A. & Reece, B.F., 1988. "The Consumption Behaviour of Farmers: a review of the evidence," Review of Marketing and Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 56(02), August.
  • Handle: RePEc:ags:remaae:12552
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    File URL: http://purl.umn.edu/12552
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    References listed on IDEAS

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    1. H. W. Arndt & Burgess Cameron, 1957. "An Australian Consumption Function," The Economic Record, The Economic Society of Australia, vol. 33(64), pages 108-115, April.
    2. John D. Mullen & Roy A. Powell & B.F. Reece, 1980. "The Income And Consumption Experiences Of A Sample Of Farm Families," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 24(3), pages 268-282, December.
    3. Ouliaris, Sam, 1981. "Household Saving and the Rate of Interest," The Economic Record, The Economic Society of Australia, vol. 57(158), pages 205-214, September.
    4. Smyth, David J & McMahon, Patrick C, 1972. "The Australian Short-Run Consumption Function," The Economic Record, The Economic Society of Australia, vol. 48(122), pages 220-231, June.
    5. Mullen, John D. & Powell, Roy A. & Reece, B.F., 1980. "The Income And Consumption Experiences Of A Sample Of Farm Families," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 24(03), December.
    6. Freebairn, J W, 1977. "Inflation and Stability of the Household Consumption-Savings Function," The Economic Record, The Economic Society of Australia, vol. 53(142&143), pages 198-218, June-Sept.
    7. Milton Friedman, 1957. "A Theory of the Consumption Function," NBER Books, National Bureau of Economic Research, Inc, number frie57-1.
    8. Rutledge, D J S & Madden, G M, 1974. "The Australian Short-run Consumption Function: A Comment," The Economic Record, The Economic Society of Australia, vol. 50(130), pages 287-295, June.
    9. Campbell, Keith O., 1958. "Some Reflections On Agricultural Investment," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 2(02), December.
    10. J. Hirshleifer, 1958. "On the Theory of Optimal Investment Decision," Journal of Political Economy, University of Chicago Press, vol. 66, pages 329-329.
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    Cited by:

    1. Sand, Roald, 2002. "The Propensity to Consume Income from Different Sources and Implications for Saving: An Application to Norwegian Farm Households," Workshop on the Farm Household-Firm Unit: Its Importance in Agriculture and Implications for Statistics, April 12-13, 2002, Wye Campus,Imperial College 15716, International Agricultural Policy Reform and Adjustment Project (IAPRAP).

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    Keywords

    Consumer/Household Economics;

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