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Off-farm Employment and Farming Efficiency in Modern Agriculture: A Dynamic Panel Analysis

Listed author(s):
  • Bjornsen, Hild-Marte
  • Mishra, Ashok K.

Most of the empirical literature in this area tends to analyze labor allocation decisions of economic agents using cross-sectional data. But such methods implicitly assume that model parameters are stable (constant) across firms and over time. The use of cross-sectional methods is therefore glaringly at odds with the firm-specific aspects of the theoretical models employed in labor economics. Using a large panel data this study investigates the simultaneous relationship between farming efficiency and the off-farm labor supply decisions of both farm operators and their spouses. We also account for unobserved heterogeneity and correcting for simultaneity bias in such estimation. Results reveal several interesting findings. First, farming efficiency (ratio of farm revenue to total variable cost) has a positive and negative impact on hours of off-farm work by farm operators and spouses, respectively. Second, agricultural subsidy has a negative and positive effect on off-farm work hours of farm operators and spouses, respectively. Finally, we find a dynamic relationship between off-farm labor supply and farming efficiency. Specifically, in the case of the farm operator, off-farm work first increases farming efficiency in the first period and then decreases it in the second period. On the other hand, we observe a positive correlation, for both periods, between off-farm hours worked by spouses and farming efficiency.

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File URL: http://purl.umn.edu/124742
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Paper provided by Agricultural and Applied Economics Association in its series 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington with number 124742.

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Date of creation: 2012
Handle: RePEc:ags:aaea12:124742
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  1. E. Phimister & D. Roberts, 2006. "The Effect of Off-farm Work on the Intensity of Agricultural Production," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 34(4), pages 493-515, August.
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  3. Ashok K. Mishra & Barry K. Goodwin, 1997. "Farm Income Variability and the Supply of Off-Farm Labor," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(3), pages 880-887.
  4. Dewbre, Joe & Mishra, Ashok K., 2007. "Impact of Program Payments on Time Allocation and Farm Household Income," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 39(03), December.
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  8. Maddala,G. S., 1986. "Limited-Dependent and Qualitative Variables in Econometrics," Cambridge Books, Cambridge University Press, number 9780521338257, October.
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  11. Babatunde, Raphael O. & Qaim, Matin, 2010. "Impact of Off-farm Income on Food Security and Nutrition in Nigeria," 2010 AAAE Third Conference/AEASA 48th Conference, September 19-23, 2010, Cape Town, South Africa 97332, African Association of Agricultural Economists (AAAE);Agricultural Economics Association of South Africa (AEASA).
  12. Glauben, Thomas & Herzfeld, Thomas & Wang, Xiaobing, 2005. "Labor Market Participation of Chinese Agricultural Households," 2005 International Congress, August 23-27, 2005, Copenhagen, Denmark 24516, European Association of Agricultural Economists.
  13. Avner Ahituv & Ayal Kimhi, 2006. "Simultaneous estimation of work choices and the level of farm activity using panel data," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 33(1), pages 49-71, March.
  14. Ashok Mishra & Barry Goodwin, 1998. "Income risk and allocation of labour time: an empirical investigation," Applied Economics, Taylor & Francis Journals, vol. 30(12), pages 1549-1555.
  15. Joe Dewbre, 2006. "The Impact of Coupled and Decoupled Government Subsidies on Off-Farm Labor Participation of U.S. Farm Operators," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 88(2), pages 393-408.
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  17. Hisham El-Osta & Ashok Mishra & Mary Ahearn, 2004. "Labor Supply by Farm Operators Under “Decoupled” Farm Program Payments," Review of Economics of the Household, Springer, vol. 2(4), pages 367-385, 08.
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