Production, Consumption, and Labor Supply Decisions of Farm Households: A Review of the Evidence for North America

Agriculture in North America is. highly integrated with the other sectors of the economy through markets for farm inputs,' farm products, consumer goods, and labor; During the early 1950s, and to a-iesser-extent during the early 1980s, farm households incomes were depressed-relative to nonfarm household incomes. The reasons"were primarily that the-'supply curve for agricultural products had been shifting faster due to rapid technical change than the demand curve-arid real wage rates-had been rising"in the nonfarm sector, especially during the 1940s and 1950s. For labor to be fully enqjloyed and farm labor; to earn its opportunity return compared to the nonfarm sector, net transfers of labor (and other resources) out of agriculture were necessary. The geograph ical dispersion o'f agriculture as an industry and-its^rural location away from most but riot all industries increases the costs of obtaining information.about nonfarm jobs and reduceis the probability of household mobility. Although there has been a dramatic reduction in the number of farms and' farm population since 1950 in the United States (and Canada), which has reduced the labor eii^jloyed in agriculture, another major source of resource adjustment has been increased dual emplo3mient of farm household members—work on their own farm and work at off-farm jobs. Some refer to this phenomena as part-time farming.