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Off-Farm Work Decisions of Farmers Over the Life Cycle: Evidence from Panel Data

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  • Kimhi, Ayal

Abstract

One of the main questions regarding the phenomenon of part-time farming is whether it is a stable situation or a temporary stage before quitting farming altogether. A conclusion may be reached by examining the structural state dependence of farmers' discrete choices regarding off-farm work over time. A dynamic programming model of utility maximization in which current work decisions affect future utility is developed, and an estimation strategy based on the Hotz-Miller Multinomial Logit framework for panel data is suggested. The model is estimated using Israeli census-panel data and the hypothesis that state dependence is not important is strongly rejected. In particular, the results indicate that farmers choose to work off the farm if it leads to lower prospects of a future exit. Hence, it may be concluded that Israeli farmers do not see the off-farm work option as a step on the way out of agriculture, but rather as a preferred long-run choice in combination with farming.

Suggested Citation

  • Kimhi, Ayal, 1996. "Off-Farm Work Decisions of Farmers Over the Life Cycle: Evidence from Panel Data," Working Papers 232798, Hebrew University of Jerusalem, Center for Agricultural Economic Research.
  • Handle: RePEc:ags:hecaer:232798
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    References listed on IDEAS

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    1. Huffman, Wallace E & Lange, Mark D, 1989. "Off-Farm Work Decisions of Husbands and Wives: Joint Decision Making," The Review of Economics and Statistics, MIT Press, vol. 71(3), pages 471-480, August.
    2. Altonji, Joseph G, 1986. "Intertemporal Substitution in Labor Supply: Evidence from Micro Data," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages 176-215, June.
    3. Daniel A. Sumner, 1982. "The Off-Farm Labor Supply of Farmers," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 64(3), pages 499-509.
    4. Brian W. Gould & William E. Saupe, 1989. "Off-Farm Labor Market Entry and Exit," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 71(4), pages 960-969.
    5. Huffman, Wallace E, 1980. "Farm and Off-Farm Work Decisions: The Role of Human Capital," The Review of Economics and Statistics, MIT Press, vol. 62(1), pages 14-23, February.
    6. Levhari, David & Weiss, Yoram, 1974. "The Effect of Risk on the Investment in Human Capital," American Economic Review, American Economic Association, vol. 64(6), pages 950-963, December.
    7. Gronau, Reuben, 1977. "Leisure, Home Production, and Work-The Theory of the Allocation of Time Revisited," Journal of Political Economy, University of Chicago Press, vol. 85(6), pages 1099-1123, December.
    8. V. Joseph Hotz & Robert A. Miller, 1993. "Conditional Choice Probabilities and the Estimation of Dynamic Models," Review of Economic Studies, Oxford University Press, vol. 60(3), pages 497-529.
    9. Heckman, James J & Sedlacek, Guilherme L, 1990. "Self-selection and the Distribution of Hourly Wages," Journal of Labor Economics, University of Chicago Press, vol. 8(1), pages 329-363, January.
    10. Weiss, Yoram, 1971. "Learning by doing and occupational specialization," Journal of Economic Theory, Elsevier, vol. 3(2), pages 189-198, June.
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    Cited by:

    1. Kimhi, Ayal & Bollman, Ray D., 1999. "Family farm dynamics in Canada and Israel: the case of farm exits," Agricultural Economics of Agricultural Economists, International Association of Agricultural Economists, vol. 21(1), August.

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    Financial Economics;

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