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Risk and farm operator labour supply

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Abstract

This study uses a large increase in US Federal crop insurance subsidies as a natural experiment to identify the importance of risk for farm operator labour supply. Subsidy increases induced greater crop insurance coverage, which in turn reduced farmers' financial risks. Crop insurance participation data are merged with farm-level Census of Agriculture data from 1992 and 1997 to compare how individuals' off-farm labour supply changed in response to the policy-induced change in insurance coverage. The empirical approach controls for unobserved heterogeneity and accounts for the censored nature of the data. It is found that greater insurance coverage reduces the off-farm labour supply of operators who produced at least $100 000 of output, and increased the labour supply of small-farm operators who produced less than $25 000 of output.

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  • Nigel Key & Michael Roberts & Erik O'Donoghue, 2006. "Risk and farm operator labour supply," Applied Economics, Taylor & Francis Journals, vol. 38(5), pages 573-586.
  • Handle: RePEc:taf:applec:v:38:y:2006:i:5:p:573-586
    DOI: 10.1080/00036840500369043
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    Cited by:

    1. Sylvie Démurger & Haiyuan Wan, 2012. "Payments for ecological restoration and internal migration in China: the sloping land conversion program in Ningxia," IZA Journal of Migration, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 1(1), pages 1-22, December.
    2. Burns, Christopher & Prager, Daniel, "undated". "Do Direct Payments and Crop Insurance Influence Commercial Farm Survival and Decisions to Expand?," 2016 Annual Meeting, July 31-August 2, 2016, Boston, Massachusetts 235693, Agricultural and Applied Economics Association.
    3. Jeremy G. Weber & Nigel Key & Erik O’Donoghue, 2016. "Does Federal Crop Insurance Make Environmental Externalities from Agriculture Worse?," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 3(3), pages 707-742.
    4. Liang, Yicheng & Li, Shuzhuo & Feldman, Marcus W. & Daily, Gretchen C., 2012. "Does household composition matter? The impact of the Grain for Green Program on rural livelihoods in China," Ecological Economics, Elsevier, vol. 75(C), pages 152-160.

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