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Farm income variability and off-farm employment in Ireland

Farm income variability and off-farm employment in Ireland PurposeThe purpose of this paper is to identify the potential relationship between farm income variability and off-farm employment decisions in the short and medium term for the case of Irish farm operators.Design/methodology/approachPanel probit models of off-farm labour supply are estimated using Teagasc National Farm Survey data for Irish farms. The framework is based largely on standard expected utility but includes a constraint for recent employment history.FindingsThe analyses identifies some evidence of a positive association between farm income variability and off-farm employment in the medium term but no significant relationship in the short term. This suggests that off-farm employment is part of a wider portfolio decision but is not a strong solution to short-term farm income shocks.Practical implicationsEuropean farmers increasingly face high income variability but financial risk management tools are not sufficiently developed or widely accessible to assist farmers in managing the associated risk. This deficiency can have negative implications for household economic welfare and future farm investments and hence the future farm income. Off-farm employment can form part of a wider medium-term portfolio strategy but more effective tools are also required for risk management particularly in dealing with short-term volatility and where off-farm employment is not a realistic endeavour given time constraints and/or demographics.Originality/valueThe estimation of farm income variability includes a detrending method thus reducing the likelihood of overestimating farm income variability for farms in deliberate expansion or decline. While previous research has typically focused on the short-term response of farmers to historical farm income variability, this research has distinguished between the short and medium term. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Agricultural Finance Review Emerald Publishing

Farm income variability and off-farm employment in Ireland

Loughrey, Jason; Hennessy, Thia
Agricultural Finance Review , Volume 76 (3): 24 – Sep 5, 2016
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Publisher
Emerald Publishing
Copyright
Copyright © Emerald Group Publishing Limited
ISSN
0002-1466
DOI
10.1108/AFR-10-2015-0043
Publisher site
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Abstract

PurposeThe purpose of this paper is to identify the potential relationship between farm income variability and off-farm employment decisions in the short and medium term for the case of Irish farm operators.Design/methodology/approachPanel probit models of off-farm labour supply are estimated using Teagasc National Farm Survey data for Irish farms. The framework is based largely on standard expected utility but includes a constraint for recent employment history.FindingsThe analyses identifies some evidence of a positive association between farm income variability and off-farm employment in the medium term but no significant relationship in the short term. This suggests that off-farm employment is part of a wider portfolio decision but is not a strong solution to short-term farm income shocks.Practical implicationsEuropean farmers increasingly face high income variability but financial risk management tools are not sufficiently developed or widely accessible to assist farmers in managing the associated risk. This deficiency can have negative implications for household economic welfare and future farm investments and hence the future farm income. Off-farm employment can form part of a wider medium-term portfolio strategy but more effective tools are also required for risk management particularly in dealing with short-term volatility and where off-farm employment is not a realistic endeavour given time constraints and/or demographics.Originality/valueThe estimation of farm income variability includes a detrending method thus reducing the likelihood of overestimating farm income variability for farms in deliberate expansion or decline. While previous research has typically focused on the short-term response of farmers to historical farm income variability, this research has distinguished between the short and medium term.

Journal

Agricultural Finance Review – Emerald Publishing

Published: Sep 5, 2016

References

  • Analysing farmers’ use of price hedging instruments: an experimental approach
  • Implicit contracts, labor mobility, and unemployment
  • Making work pay in a rationed labor market
  • A theory of the allocation of time
  • Farm work, off-farm work, and hired farm labour: estimating a discrete-choice model of French farm couples’ labour decisions
  • The value of doing what you like: evidence from the self-employed in 23 countries
  • The Irish macroeconomic response to an external shock with an application to stress testing