Farming Efficiency and the Determinants of Multiple Job Holding by Farm Operators

The extent to which farm families engage in off-farm employment activities is a topic of central importance to understanding the financial well-being of farm households. The degree of financial stress experienced by U.S. farm families is always a concern to policy makers. Yet, policy considerations often ignore the substantial involvement of most farm households in nonfarm labor markets. It has been shown that, when the entire farm household is considered, the “average” U.S. farm household has a higher total income and much greater asset holdings than is the case for nonfarm households (see, e.g., Goodwin). Mishra et al. presented data for 2000 suggesting that, when all farms are considered, 92% of total household income came from nonfarm sources. Of course, such figures depend on how one chooses to define a farm. When one considers large and very large commercial farms, the share of farm income in total household income ranges from 50 to 75%.1 Further, the involvement of farm households in nonfarm employment activities has shown steady growth over the last 50 years. Smith notes that in 1930 about 11% of farmers worked at least 100 days per year off the farm. By 1997, this figure had risen to about 45% with roughly one-third of operators working full time off the farm. An extensive literature has evolved that investigates the determinants of farm household involvement in nonfarm labor markets. Schultz noted that off-farm employment was an important means by which farm households can manage risk through diversification of income sources. Mishra and Goodwin confirmed the