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Farm household risk balancing: empirical evidence from Switzerland

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  • de Mey, Yann
  • Wauters, Erwin
  • Schmid, Dierk
  • Van Passel, Steven
  • Vancauteren, Mark
  • Lips, Markus

Abstract

This paper presents the first empirical evidence on household risk balancing behavior, i.e., strategic off-farm decisions in response to changes in expected business risk. Using Swiss FADN data, we estimate a fixed effects seemingly unrelated regression model to analyze how farm households jointly alter their levels of debt, off-farm income and consumption. Evidence suggests that in response to changes in expected business risk, farm households make strategic off-farm decisions. Our study demonstrates that part of the behavioral risk response of farm households is ignored when focusing solely on farm-level analyses and illustrates the relevance of the household risk balancing framework.

Suggested Citation

  • de Mey, Yann & Wauters, Erwin & Schmid, Dierk & Van Passel, Steven & Vancauteren, Mark & Lips, Markus, 2014. "Farm household risk balancing: empirical evidence from Switzerland," 2014 International Congress, August 26-29, 2014, Ljubljana, Slovenia 182719, European Association of Agricultural Economists.
  • Handle: RePEc:ags:eaae14:182719
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    References listed on IDEAS

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    1. Yann de Mey & Frankwin van Winsen & Erwin Wauters & Mark Vancauteren & Ludwig Lauwers & Steven Van Passel, 2014. "Farm-level evidence on risk balancing behavior in the EU-15," Agricultural Finance Review, Emerald Group Publishing, vol. 74(1), pages 17-37, April.
    2. 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.
    3. Nadja El Benni & Robert Finger & Stefan Mann, 2012. "Effects of agricultural policy reforms and farm characteristics on income risk in Swiss agriculture," Agricultural Finance Review, Emerald Group Publishing, vol. 72(3), pages 301-324, November.
    4. Barry K. Goodwin & Ashok K. Mishra, 2004. "Farming Efficiency and the Determinants of Multiple Job Holding by Farm Operators," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 86(3), pages 722-729.
    5. Susan Offutt, 2002. "The Future of Farm Policy Analysis: A Household Perspective," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 84(5), pages 1189-1200.
    6. Fernandez-Cornejo, Jorge & Mishra, Ashok K. & Nehring, Richard F. & Hendricks, Chad & Southern, Malaya & Gregory, Alexandra, 2007. "Off-Farm Income, Technology Adoption, And Farm Economic Performance," Economic Research Report 7234, United States Department of Agriculture, Economic Research Service.
    7. Woldehanna, Tassew & Lansink, Alfons Oude & Peerlings, Jack, 2000. "Off-farm work decisions on Dutch cash crop farms and the 1992 and Agenda 2000 CAP reforms," Agricultural Economics of Agricultural Economists, International Association of Agricultural Economists, vol. 22(2), March.
    8. Serra, Teresa & Goodwin, Barry K. & Featherstone, Allen M., 2004. "Determinants Of Investments In Non-Farm Assets By Farm Households," 2004 Annual meeting, August 1-4, Denver, CO 20329, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    9. Kenneth Poon & Alfons Weersink, 2011. "Factors affecting variability in farm and off-farm income," Agricultural Finance Review, Emerald Group Publishing, vol. 71(3), pages 379-397, November.
    10. Simon Jetté-Nantel & David Freshwater & Ani L. Katchova & Martin Beaulieu, 2011. "Farm income variability and off-farm diversification among Canadian farm operators," Agricultural Finance Review, Emerald Group Publishing, vol. 71(3), pages 329-346, November.
    11. Jeffrey M Wooldridge, 2010. "Econometric Analysis of Cross Section and Panel Data," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262232588, January.
    12. Amber Remble & Maria Marshall & Roman Keeney, 2014. "Household Saving Behavior and the Influence of Family-Owned Business," Journal of Family and Economic Issues, Springer, vol. 35(3), pages 411-422, September.
    13. Carlo Cafiero & Fabian Capitanio & Antonio Cioffi & Adele Coppola, 2007. "Risk and Crisis Management in the Reformed European Agricultural Policy," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 55(4), pages 419-441, December.
    14. 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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    Cited by:

    1. Daniel Burkhard & Christian Schmid & Kaspar Wüthrich, 2015. "Financial incentives and physician prescription behavior: Evidence from dispensing regulations," Diskussionsschriften dp1511, Universitaet Bern, Departement Volkswirtschaft.

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