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Higher Off-farm Income Enables Farmers to Borrow More and Increase Investment in Their Operations

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  • Key, Nigel

Abstract

Most agricultural lenders extend loans based on their assessment of a borrower’s ability to repay debt. Because of this, some farmers may not be able to secure as much credit as they would like for their farm businesses. A lack of credit could prevent these farmers from expanding production or could restrict investments in productivity-enhancing technologies. Off-farm income may help some farm households qualify for larger loans, which could lead to higher farm output, productivity, and profit. Using farm-level data from USDA’s Agricultural Resource Management Survey, the USDA, Economic Research Service (ERS) estimated the effect of off-farm income on farm borrowing, investment, operation size and productivity from 2007 to 2016.

Suggested Citation

  • Key, Nigel, 2022. "Higher Off-farm Income Enables Farmers to Borrow More and Increase Investment in Their Operations," Amber Waves:The Economics of Food, Farming, Natural Resources, and Rural America, United States Department of Agriculture, Economic Research Service, vol. 2022, April.
    • Handle: RePEc:ags:uersaw:329721
    DOI: 10.22004/ag.econ.329721
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    Cited by:

    1. Liu, Pihui & Han, Chuanfeng & Liu, Xinghua & Teng, Minmin, 2023. "Assessing the effect of nonfarm income on the household cooking energy transition in rural China," Energy, Elsevier, vol. 267(C).

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