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Farm income variability and off‐farm diversification among Canadian farm operators

Author

Listed:
  • Simon Jetté‐Nantel
  • David Freshwater
  • Ani L. Katchova
  • Martin Beaulieu

Abstract

Purpose - For many farm families and operators across the OECD countries, off‐farm income has become a major determinant of their well‐being. The purpose of this paper is to investigate the potential role of off‐farm employment as a risk management tool among farm operators. Design/methodology/approach - A two‐part model is applied to a longitudinal farm‐level data set for about 20,000 Canadian farms, from 2001 to 2006, in order to estimate the relationship between farm income risk and the decision to participate in the off‐farm labor market and the level of off‐farm employment income. Findings - The variability of farm market revenue is found to be positively related to the likelihood of off‐farm work and the level of off‐farm employment income, in particular for operators of relatively large farms. Hence, farm operators' production decisions appear to be conditioned on an income portfolio that includes a substantial amount of off‐farm income for all sizes of farms. Social implications - These results reinforce the need to consider the portfolio effect induced by the integration of farm resources within the non‐farm sector. This is particularly relevant to risk management farm policies that have typically considered decisions made in the agricultural sector in isolation. Originality/value - This paper uses a true farm‐level panel data set to investigate the relationship between farm income risk and off‐farm work. The size of the data set also allows the robustness of the results across farm typologies and size to be tested. This study contributes to the understanding of structural changes in the farm sector, and their potential implications for both rural and agricultural policies.

Suggested Citation

  • 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 Limited, vol. 71(3), pages 329-346, November.
    • Handle: RePEc:eme:afrpps:v:71:y:2011:i:3:p:329-346
    DOI: 10.1108/00021461111177602
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    Citations

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    Cited by:

    1. Edward Knapp & Jason Loughrey, 2017. "The single farm payment and income risk in Irish farms 2005–2013," Agricultural and Food Economics, Springer;Italian Society of Agricultural Economics (SIDEA), vol. 5(1), pages 1-15, December.
    2. Khan,Waseem & Tabassum, Shazia & Ansari, Saghir Ahmad, 2017. "Can Diversification of Livelihood Sources Increase Income of Farm Households? — A Case Study in Uttar Pradesh," Agricultural Economics Research Review, Agricultural Economics Research Association (India), vol. 30(Conferenc).
    3. Yann de Mey & Erwin Wauters & Dierk Schmid & Markus Lips & Mark Vancauteren & Steven Van Passel, 2016. "Farm household risk balancing: empirical evidence from Switzerland," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 43(4), pages 637-662.
    4. Jason Loughrey & Fiona Thorne & Thia Hennessy, 2016. "A Microsimulation Model for Risk in Irish Tillage Farming," International Journal of Microsimulation, International Microsimulation Association, vol. 9(2), pages 41-76.
    5. Pastusiak, Radosław & Jasiniak, Magdalena & Stawska, Joanna & Soliwoda, Michał, 2017. "Znaczenie dochodów pozarolniczych w gospodarstwach rolnych Kanady i USA," Village and Agriculture (Wieś i Rolnictwo), Polish Academy of Sciences (IRWiR PAN), Institute of Rural and Agricultural Development, vol. 1(174).
    6. de Mey, Yann & Wauters, Erwin & Lips, Markus & Schmid, Dirk & Vancauteren, Mark & Van Passel, Steven, 2014. "Farm household risk balancing in Switzerland and Belgium: an econometric and survey approach," 2014 International Congress, August 26-29, 2014, Ljubljana, Slovenia 186678, European Association of Agricultural Economists.
    7. Hadrich, Joleen C. & Pendell, Dustin L. & Kim, Youngjune, 2018. "The effect of financial structure and efficiency on Kansas farm growth," 2018 Annual Meeting, August 5-7, Washington, D.C. 274110, Agricultural and Applied Economics Association.
    8. Harkness, Caroline & Areal, Francisco J. & Semenov, Mikhail A. & Senapati, Nimai & Shield, Ian F. & Bishop, Jacob, 2021. "Stability of farm income: The role of agricultural diversity and agri-environment scheme payments," Agricultural Systems, Elsevier, vol. 187(C).

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