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Determinants of Farm Labour Use: A Comparison between Ireland and Italy


  • Loughrey, Jason
  • Hennessy,Thia
  • Hanrahan, Kevin
  • Donnellan, Trevor
  • Raimondi, Valentina
  • Olper, Alessandro


This paper examines the effect of the decoupling of farm direct payments upon the off-farm labour supply decisions of farmers in both Ireland and Italy, using panel data from the Farm Business Survey (REA) and FADN database covering the period from 2002 to 2009 to model these decisions. Drawing from the conceptual agricultural household model, the authors hypothesise that the decoupling of direct payments led to an increase in off-farm labour activity despite some competing factors. This hypothesis rests largely upon the argument that the effects of changes in relative wages have dominated other factors. At a micro level, the decoupling-induced decline in the farm wage relative to the non-farm wage ought to have provoked a greater incentive for off-farm labour supply. The main known competing argument is that decoupling introduced a new source of non-labour income i.e. a wealth effect. This may in turn have suppressed or eliminated the likelihood of increased off-farm labour supply for some farmers. For the purposes of comparative analysis, the Italian model utilises the data from the REA database instead of the FADN as the latter has a less than satisfactory coverage of labour issues. Both models are developed at a national level. The paper draws from the literature on female labour supply and uses a sample selection corrected ordinary least squares model to examine both the decisions of off-farm work participation and the decisions regarding the amount of time spent working off-farm. The preliminary results indicate that decoupling has not had a significant impact on off-farm labour supply in the case of Ireland but there appears to be a significantly negative relationship in the Italian case. It still remains the case in both countries that the wealth of the farmer is negatively correlated with the likelihood of off-farm employment.

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  • Loughrey, Jason & Hennessy,Thia & Hanrahan, Kevin & Donnellan, Trevor & Raimondi, Valentina & Olper, Alessandro, 2013. "Determinants of Farm Labour Use: A Comparison between Ireland and Italy," Factor Markets Working Papers 172, Centre for European Policy Studies.
  • Handle: RePEc:eps:fmwppr:172

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    References listed on IDEAS

    1. 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.
    2. 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.
    3. Stephen O'Neill & Kevin Hanrahan, 2012. "Decoupling of agricultural support payments: the impact on land market participation decisions," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 39(4), pages 639-659, September.
    4. 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.
    5. 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.
    6. Thia Hennessy & Mark O’ Brien, 2006. "The Contribution of Off-Farm Income to the Viability of Farming in Ireland," Working Papers 0613, Rural Economy and Development Programme,Teagasc.
    7. Teresa Serra & Barry K. Goodwin & Allen M. Featherstone, 2005. "Agricultural Policy Reform and Off-farm Labour Decisions," Journal of Agricultural Economics, Wiley Blackwell, vol. 56(2), pages 271-285.
    8. J. G. Tokle & Wallace E. Huffman, 1991. "Local Economic Conditions and Wage Labor Decisions of Farm and Rural Nonfarm Couples," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 73(3), pages 652-670.
    9. Donnellan, Trevor & Hennessy, Thia C., 2012. "The Labour Allocation Decisions of Farm Households: Defining a theoretical model," Working Papers 137021, Factor Markets, Centre for European Policy Studies.
    10. Thia C. Hennessy & Tahir Rehman, 2008. "Assessing the Impact of the 'Decoupling' Reform of the Common Agricultural Policy on Irish Farmers' Off-farm Labour Market Participation Decisions," Journal of Agricultural Economics, Wiley Blackwell, vol. 59(1), pages 41-56, February.
    11. A. Kimhi, 1994. "Participation Of Farm Owners In Farm And Off-Farm Work Including The Option Of Full-Time Off-Farm Work," Journal of Agricultural Economics, Wiley Blackwell, vol. 45(2), pages 232-239.
    12. Alessandro Corsi & Cristina Salvioni, 2012. "Off- and on-farm labour participation in Italian farm households," Applied Economics, Taylor & Francis Journals, vol. 44(19), pages 2517-2526, July.
    13. David A. Hennessy, 1998. "The Production Effects of Agricultural Income Support Policies under Uncertainty," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 80(1), pages 46-57.
    14. Lass, Daniel A. & Findeis, Jill L. & Hallberg, Milton C., 1989. "Off-Farm Employment Decisions By Massachusetts Farm Households," Northeastern Journal of Agricultural and Resource Economics, Northeastern Agricultural and Resource Economics Association, vol. 18(2), October.
    15. Kilkenny, Maureen, 1993. "Rural vs. Urban Effects of Terminating Farm Subsidies," Staff General Research Papers Archive 11121, Iowa State University, Department of Economics.
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    Cited by:

    1. Loughrey, Jason & Hennessy, Thia, 2016. "The Common Agricultural Policy and Farmers’ Off-farm Labour Supply," 160th Seminar, December 1-2, 2016, Warsaw, Poland 249796, European Association of Agricultural Economists.

    More about this item

    JEL classification:

    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J43 - Labor and Demographic Economics - - Particular Labor Markets - - - Agricultural Labor Markets
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets

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