EFFECTS ON FARM INCOMES AND RURAL LABOUR OF A RELATIVE INCREASE IN WAGES*

We use the concept of the elasticity of farm incomes with respect to changes in input prices to analyse the effects of a large increase in relative wages on selected measures of farm incomes. In order to estimate the elasticity of farm incomes we have to estimate elasticities and cross-elasticities of demand and supply for farm labour and capital. The estimates of elasticity of demand for operator and hired labour allow us to calculate the impact of a rise in wages on numbers of farmers and hired labour employed in agriculture.     

The Dynamics of Farm Incomes: Panel data analysis using the Farm Accounts Survey

This paper uses longitudinal information from the Scottish Farm Accounts Survey to explore the dynamics of Scottish farm incomes between 1988/89 and 1999/2000. Both the Net Farm Income and Cash Income of farms are considered. The results show high levels of income variability and income mobility within Scottish agriculture. Although exit rates from the lowest income groups remain relatively high even when spells of low income have lasted a number of years, there is evidence of farms with persistent low farm income and farms experiencing repeated spells of low‐income. Smaller farm size and having a farmer aged over 65 increase both the probability that a farm will fall into the lowest income group and the length of time spent in that income group. Further the results suggest that the impact of the post‐1997 agricultural recession on income mobility depended on the income status of the farm when the recession began.     

A Note on the Effects of the Income Stabilisation Tool on Income Inequality in Agriculture

Increasing concerns with income risks in agriculture have led to discussions on the introduction of an Income Stabilisation Tool (IST) in Europe. In this note, we extend existing evaluations of the IST by investigating the potential effect of the IST on inequality in farm incomes using Swiss agriculture as a case study. We find that the IST will significantly reduce income inequality, in particular by increasing lower quantiles of the income distribution. This property constitutes a value‐added of the IST that is not yet considered in the current policy debate.     

Economic impacts of East Coast Fever immunization on smallholder farms,Kenya: a simulation analysis

A whole farm simulation model, Technology Impact Evaluation System (TIES), was used to assess ex-ante financial and economic impacts of immunization of dairy cattle against East Coast Fever (ECF) by the infection and treatment method (ITM) on smallholder farms from two sites in Kenya. Four alternative strategics of immunization in combination with different levels of acaricide use were compared with the current acaricide-based method of control. The economic impacts were estimated using simulated net present values, present values of ending net worth, internal rates of return, benefit-cost ratios, annual cash farm incomes, cash expenses, and net farm incomes. The results from the analysis indicate that ECF immunization strategics are financially and economically viable on smallholder farms. Based on the risk preference for risk averse producers, the most preferred strategy was to adopt ITM in combination with a 75% reduction in acaricidc use. The results obtained provide a good indication of the relative orders of magnitude of the farm level financial and economic effects of ECF immunization by ITM. The whole farm simulation model used for the analysis has the advantage of incorporating the risks involved in farm production. Whole farm simulation offers a flexible method for assessing the financial and economic impacts of alternative disease control methods on smallholder farms.     

The Redistributive Effects of Agricultural Policy on Scottish Farm Incomes

This paper focuses on the measurement of the redistributive effects of agricultural policy, proposing measures to characterise and quantify these effects that are based on the change in absolute value of the Gini coefficient. An illustrative study shows that the distribution of support in Scotland in 1999/2000 was regressive with respect to pre‐support farm incomes. Nevertheless, the provision of support would have had an equalising effect on farm incomes but for the resulting changes in the ranking of farms within the income distribution. Reranking not only makes ‘coupled’ support policies ineffective but also inefficient as redistributive instruments.     

ECONOMIC ASPECTS OF FARM POVERTY

The results of the Henderson Poverty Inquiry's 1973 farm household income survey are discussed and supplemented by income distributions based on taxation returns from 1968/69 to 1972/73. It is concluded that much low income 'poverty' is temporary, being the product of the instability of agriculture. A case is made for the inclusion of wealth in farm and non-farm welfare comparisons. Proposals aimed at directly increasing incomes are discussed and hypothetical income distributions are presented to indicate the impact of the Henderson Inquiry's guaranteed income scheme on farm income distributions.     

MEASURING THE RELATIVE INCOME OF FARM LABOUR, 1941–611

This is an analysis of farm labour income at an aggregate level for the period 1941 to 1961. The income of farm labour was estimated for paid workers, operators or self-employed workers, and total paid and unpaid workers, These incomes were compared with five sub-sectors of the nonfarm economy and for five geographical regions. In estimating income, adjustments were made for the age and sex composition of labour force, bours of work in various industries, movement of prices of inputs and output, and period of employment of farm workers. The results show significant differences in incomes of various categories of workers, and incomes of farm workers compared to various sub-sectors of the nonfarm economy. Similarly, various regions were found to. be highly heterogeneous with respect to relative labour income levels. When the farm and nonfarm sectors were adjusted for differences in characteristics, the labour income ratio of Canadian agriculture on a normalized man equivalent basis ranged between 41 and 63 percent.     

Income Mobility and Income Inequality in Scottish Agriculture

The paper explores the distributional consequences of farm income mobility in Scotland, focusing on the extent to which farm income inequality is a chronic as opposed to a temporary phenomenon and on the nature of the dynamic processes driving changes in farm income inequality over time. The empirical results reveal that the majority of farm income inequality was long‐run or structural in nature, reflecting differences in both farm business size and farm‐specific factors such as land quality, managerial ability and business structures. Evidence of absolute convergence in farm incomes is explained by short‐run adjustments towards equilibrium or target incomes conditional upon prices, technology and farm business size, with farm business growth conditional upon survival found to have had no significant redistributive effect.     

Does participation in the conservation reserve program impact the economic well‐being of farm households?

This study uses U.S. farm household survey data to examine how participation in the Conservation Reserve Program (CRP) affects farm household economic well-being. Further, the study also examines the effects of CRP participation on farm household consumption, income, and imputed savings. In contrast to previous studies that assume the relationships are homogenous across the population, quantile regression is used to investigate the association between CRP participation across the entire distribution of farm household consumption and income. Empirical findings suggest that the effect of CRP participation on household economic well-being differs across the income and consumption distribution. For households in the lower percentiles of the distribution, the CRP participation is associated with an increase in household consumption, but a decrease in farm household income and savings. In contrast, farm households at the median and higher income and consumption quantiles, participation in CRP is associated with lower levels of household consumption and income, but with higher levels of savings.     

Public Policy in the 21st Century: Is Prairie Agriculture Becoming Like Any Other Industry? Does it Matter?

The question addressed in this paper is whether Prairie agriculture has become "like any other industry". The implication is that a positive response would lead to the conclusion that it should therefore be treated "like any other industry" rather than being accorded the special status that it has enjoyed for more than a century
We show that, as net farm incomes have declined over the past 35 years, Prairie farmers have responded by seeking other (non-farm) sources of income. At the time of the 1996 census, net farm income accounted for only 31 percent of farm family income (down from 75 percent in 1967). By 1999, the contribution of net farm income was even lower than in 1996
In spite of the dwindling contribution of net farm income to farm family income, average farm family income in Saskatchewan has exceeded average provincial household income for all but two years between 1971 and 1998, Under these circumstances, it is necessary to ask why it is in the public interest to subsidize an activity which, in recent good times, produced 31 percent of the income of a subset of the population whose household incomes were 10–15 percent above the provincial average
Based on income levels, it is probably no longer necessary to accord farm families special status in the public policy arena. However, other policy considerations (immobility of resources, the role of agriculture in the rural economy, environmental considerations, food safety and security, for example) remain, differentiating agriculture from other industries     

THE ANALYSIS OF NET FARM INCOME: AN EXAMINATION OF FARM MANAGEMENT SURVEY DATA

The practical significance of the conventional “net farm income” is elusive. It would be useful to have an accepted method of dividing “management and investment income” into its recognised Components—managerial salary and return on tenant's capital. One is a residual if the other can be calculated, and both alternatives are considered. An empirical formula is suggested for estimating the managerial salary which may be imputed to the farmer, taking account of his total turnover, his labour bill and his net farm income. This formula is then applied to Farm Management Survey data, for individual farms and for groups of average, high and low performance (output per £ input). The method may permit closer analysis of relative profitability.     

Effects of supermarket monopsony pricing on agriculture

Potential effects of alleged monopsony pricing of farm food products by supermarkets on farm product prices, quantities, incomes and land values are assessed relative to competitive behaviour. A long‐run comparative static equilibrium model is used. For export‐competing and import‐competing products, the farm food input supply curve facing the supermarkets is close to perfectly elastic and this limits monopsony behaviour. At the margin, the opportunity to reallocate agricultural land between traded and nontraded farm products means a highly elastic supply function for nontraded food inputs facing supermarkets and very limited monopsony effects.     

THE SHORT-TERM EFFECT OF DOMESTIC OIL PRICE INCREASES ON THE AUSTRALIAN ECONOMY WITH SPECIAL REFERENCE TO THE AGRICULTURAL SECTOR

The rise in the domestic price of oil products implied by the new import parity pricing policy for domestic crude oil is likely to pose some problems for macroeconomic management. In this paper an attempt has been made to quantify the short-run adjustment problems involved, using the ORANI 78 model of the Australian economy. Results are presented for a range of variables of interest, including macroeconomic variables, industrial and workforce composition and farm incomes. With fixed real wages, farm incomes are projected to decline by between 6 and 8 per cent.     

Distress rentals and the land rental market as a safety net: contract choice evidence from Tigray,Ethiopia

Rural households in the semiarid Northern Ethiopian highlands are net buyers of food. Crop failure due to erratic and unpredictable rainfall occurs frequently and leads to food shortages and income shocks. The renting out of land may be one of the coping responses of households exposed to shocks. We developed a theoretical household model for poor landlord households capturing their contract choice response to downside production shocks. We tested econometrically whether contract choice may depend on poverty, capital constraints, production risk and random shocks. The multinomial logit model estimates show that poor households experiencing random shocks are more likely to choose fixed‐rent contracts as a distress response to shocks, suggesting that fixed‐rent contracts may be used to meet immediate needs, but at the expense of future incomes. We also found that fixed‐rent contracts are preferred when ex ante production risk is low, while sharecropping is more likely where production risk is high. Finally, we found an indication that the choice of a fixed‐rent contract as a coping response to shocks comes as a last resort after all other means of coping are exhausted.     

Rural Population Growth, 1950–1990: The Roles of Human Capital, Industry Structure, and Government Policy

Human capital raises rural incomes, but this effect is swamped by higher returns to human capital in urban markets. This leads to "brain drain" from rural areas. Populations grow more rapidly in rural counties that have a diversified employment base. Farm population grows faster (or declines more slowly) in counties with relatively high farm income, and nonfarm populations grow faster in counties with relatively high nonfarm income. However, higher farm incomes lead to slower nonfarm population growth and vice versa. Rural county government services financed by local taxes or debt have neutral or negative effects on population growth.     

Valuing seasonal climate forecasts in a state‐contingent manner

We applied state‐contingent theory to climate uncertainty at a farm level to assess the value of seasonal climate forecasts in the Central West region of NSW. We find that modelling uncertainty in a state‐contingent manner results in a lower estimate of forecast value than the typical expected value approach. We attribute this finding to a more conservative long‐term farm plan in the discrete stochastic programming (DSP) model, which is better balanced for climate uncertainty. Hence, a climate forecast, even though it still revises probabilities held by farmers, does not call forth such large changes in farm plans and associated farm incomes. We then use the DSP model to assess how attributes of a hypothetical forecasting system, particularly its skill and timeliness, as well as attributes of the decision environment, influence its value. Lastly, we assess the value of current operational forecast systems and show that the value derived from seasonal climate forecasts is relatively limited in the case study region largely because of low skill embodied in forecasts at the time when major farm decisions are being made.     

PART TIME FARMING—IMPLICATIONS FOR FARM FAMILY INCOME

The Common Agricultural Policy has been more successful at securing food supplies than at providing adequate incomes for small farmers. Among proposals for resolving the problem, part time farming is a promising option. To date, agricultural policy has at best ignored farms below the ‘full time’ threshold, at worst discriminated against them. The new Agricultural Structures policy embodies a more positive approach, however. Robson's paper calls for better information on farm households with other gainful activities. Statistics from the 1983 Farm Structure Survey provide insight into the nature and extent of part time farming in the European Community. Neglect of part time farming in the UK up to now may have stemmed from its perceived irrelevance for agricultural policy. Now that it is being viewed in a more favourable light, policy makers need to be appraised of the facts. Currently about one third of main agricultural holdings in England and Wales are part time farms in the sense that farmer or spouse combines another paid job with farming. Gasson's paper explores the nature of these other jobs and features of their distribution. Following trends in other developed countries, non-farm activities are becoming increasingly important for UK farming families. Growth in part time farming has obvious implications for income support, widely agreed to be the fundamental objective of agricultural policy in western Europe. Existing farm income measures are not adequate for assessing the extent of the income problem in agriculture. Data from the Inland Revenue's Survey of Personal Incomes and the Wye College part time farming survey fill some of the gaps left in official measurements. Non-farming earnings, pensions and investment income contribute significantly to farm household incomes. A majority of part time farming families in England and Wales make more from other sources than from farming. Although average incomes of part time farmers may exceed those of full timers, Hill's paper identifies a section of part time farming families with inadequate incomes from all sources.     

Farm Poverty and Safety Nets

Farm families with incomes below the poverty line are far less likely than wealthier farmers to receive farm support payments. Using data from the 1989–2004 Current Population Survey, we find that poor farm families are also not participating in other assistance programs. Controlling for other factors, eligible farm families have substantially lower participation rates in the Food Stamp Program and in Medicaid than eligible nonfarm families. Removing farm safety net program payments would increase the number of farmers eligible for these programs but, in the absence of behavioral changes, would only lead to small increases in the number of recipients.     

On the Characterisation and Measurement of the Redistributive Effect of Agricultural Policy

The article proposes a coherent framework for the evaluation of the redistributive performance of agricultural policy. An illustrative study shows that the vertical stance of policy in Scotland was progressive in absolute terms, reflecting the chronic dependence of Scottish agriculture on policy transfers. Nevertheless, the overall redistributive effect of policy was to increase absolute inequality in farm incomes because of horizontal inequities in the incidence of transfers, though neither systematic discrimination between farm types nor systematic reranking was the main cause. The targeting of policy transfers could be improved by the use of indicator variables more strongly correlated with pre‐transfer incomes.     

Distortions to World Trade: Impacts on Agricultural Markets and Farm Incomes

The latest versions of the Global Trade Analysis Project database and the Linkage model of the global economy (projected to 2015) are used to estimate the impact of removing all merchandise trade distortions (including agricultural subsidies). Results suggest that a move to free merchandise trade would increase farm employment, the real value of agricultural output and exports, real returns to farm land and unskilled labor, and real net farm incomes in developing countries. This would occur despite the decline in international terms of trade for some developing countries that are net food importers or are enjoying preferential access to agricultural markets of high-income countries.