Two essays on long-run objectives of the farm household

Amber A Remble, Purdue University

Abstract

U.S. agriculture in the twentieth century evidenced dramatic change. With the reduction in the number of occupational farmers, the future of these farm operations and the decisions that shape the sector are of paramount importance. The objectives and choices made by farmers, particularly their approaches to business succession, will have significant impacts on the farm community and the future structure of U.S. agriculture. The first paper of this thesis identifies factors that influence primacy between generations in the management structure of U.S. family farms. The paper fills an important gap in the farm succession literature by exploring succession (in management of the farm) as an incremental process. Estimation with cross-sectional data from the USDA-ERS’ Agricultural Resource Management Survey (ARMS) and a limited dependent variable model explains the decision for younger generation operators to assume primary farm management duties while a senior operator moves to a secondary role. Our findings include a number of statistically significant attributes that explain variation in the younger farmer’s managerial role (primary versus secondary). These results suggest that transferring primary operator status is more strongly influenced by family members’ characteristics such as age and education than any particular set of farm financial or operating characteristics. The second paper of this thesis focuses on the lifecycle income objective of business-owning (farm and nonfarm) households. Specifically, we test for differences in saving behavior of these entrepreneurial households relative to the average U.S. household. We hypothesize that the complex relationship between household and business management decisions has the potential to counter predictions from standard household savings theory, a notion that previous studies in the literature have failed to take into account. With an increasing number of small business-owning families, this has the potential for analyses to misrepresent household savings rates. Here again we use a limited dependent variable model, keying in on the saving behavior and ability of household respondents in the Survey of Consumer Finances (SCF) for 2007. Econometric investigation is used to describe which attributes influence the probability of a household attaining a positive saving level in the past year. The estimation results indicate that, along with standard demographic influences of savings models, households owning a farm or nonfarm business have a significantly higher likelihood of maintaining private saving in a given year. Our results highlight the necessity for future research on household saving behavior to account for the differing objectives and choice sets faced by households that own businesses when conducting analysis of household saving.

Degree

M.S.

Advisors

Marshall, Purdue University.

Subject Area

Agriculture|Agricultural economics

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