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Determinants of farm income

Author

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  • Jayson Beckman
  • David Schimmelpfennig

Abstract

Purpose - – The recent fluctuations in farm income remind us of the boom-bust nature of the agricultural sector. To better understand these fluctuations in farm income, the purpose of this paper is to examine the relationship between farm income and influential factors from 1964 to 2010 allowing for structural breaks in the data. Design/methodology/approach - – The authors estimate error-correction models for an overarching model and several sub-models at different scales based on their relationship with farm income: micro, meso, and macro. The authors then provide a series of impulse response functions (IRFs) that combine short- and long-run impacts in a rigorous framework indicating the response of farm income to shocks from any of the explanatory variables. Findings - – Results indicate that prices paid (PP) and received by farmers, technological change, interest and exchange rates (ERs), gross domestic product (GDP) and land prices all influence farm income. Results using IRFs show how increases in farm income arise from shocks to prices received and GDP; while PP, interest rates, and land prices have a negative impact on farm income. Technological progress and ERs switch from having a negative short-run impact, to a positive long-run impact. Originality/value - – This paper takes a fresh look at the single, overarching model for farm income determinants. The authors break this model into three separate levels, with results indicating that these sub-groups perform better than the one overarching model of all variables.

Suggested Citation

  • Jayson Beckman & David Schimmelpfennig, 2015. "Determinants of farm income," Agricultural Finance Review, Emerald Group Publishing Limited, vol. 75(3), pages 385-402, September.
    • Handle: RePEc:eme:afrpps:v:75:y:2015:i:3:p:385-402
    DOI: 10.1108/AFR-06-2014-0019
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    Citations

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    Cited by:

    1. Frederick Murdoch Quaye & Denis Nadolnyak & Valentina Hartarska, 2017. "Factors Affecting Farm Loan Delinquency in the Southeast," Research in Applied Economics, Macrothink Institute, vol. 9(4), pages 75-92, December.
    2. Vítor João Pereira Domingues Martinho, 2019. "Testing for Structural Changes in the European Union’s Agricultural Sector," Agriculture, MDPI, vol. 9(5), pages 1-21, May.
    3. 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).
    4. Kulawik, Jacek & Płonka, Renata & Wieliczko, Barbara, 2020. "Changes in The Income Situation of Agricultural Holdings in The Light of The Polish FADN Observations from 2004-2018," Problems of Agricultural Economics / Zagadnienia Ekonomiki Rolnej 311271, Institute of Agricultural and Food Economics - National Research Institute (IAFE-NRI).
    5. Soliwoda, Michał & Kulawik, Jacek & Góral, Justyna, 2016. "Stabilizacja dochodów rolniczych. Perspektywa międzynarodowa, Unii Europejskiej i Polski," Village and Agriculture (Wieś i Rolnictwo), Polish Academy of Sciences (IRWiR PAN), Institute of Rural and Agricultural Development, vol. 3(172), January.
    6. Rembisz, Włodzimierz, 2020. "Procurement Price Level Acceptable to Both Farm Producers and Processors," Problems of Agricultural Economics / Zagadnienia Ekonomiki Rolnej 311261, Institute of Agricultural and Food Economics - National Research Institute (IAFE-NRI).
    7. Grzelak, Aleksander, 2022. "Agricultural Holdings Recording Losses – Characteristics And Determinants," Roczniki (Annals), Polish Association of Agricultural Economists and Agribusiness - Stowarzyszenie Ekonomistow Rolnictwa e Agrobiznesu (SERiA), vol. 2022(4).
    8. Danuta Zawadzka & Agnieszka Strzelecka & Ewa Szafraniec-Siluta, 2021. "Debt as a Source of Financial Energy of the Farm—What Causes the Use of External Capital in Financing Agricultural Activity? A Model Approach," Energies, MDPI, vol. 14(14), pages 1-17, July.
    9. Radosław PASTUSIAK & Magdalena JASINIAK & Michał SOLIWODA & Joanna STAWSKA, 2017. "What may determine off-farm income? A review," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 63(8), pages 380-391.
    10. Heping Ge & Lianzhen Tang & Xiaojun Zhou & Decai Tang & Valentina Boamah, 2022. "Research on the Effect of Rural Inclusive Financial Ecological Environment on Rural Household Income in China," IJERPH, MDPI, vol. 19(4), pages 1-16, February.

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