Consumption inequality between farm and nonfarm households in Taiwan: a decomposition analysis of differences in distribution

Consumption has been recognized as a more reliable indicator of household well‐being than income. Although a considerable body of literature has examined income inequality between farm and nonfarm households, little is known about inequality in consumption. This research aims to fill this knowledge gap by investigating consumption disparity between farm and nonfarm households. Using a nationally representative household survey from Taiwan, we apply an unconditional quantile regression‐based decomposition method to decompose the differences in the distribution of household expenditure between these farm and nonfarm households. The results indicate that differences in the observed characteristics between these two types of households explain most of the consumption inequality. Moreover, the difference in the education level of the farm operator, household income, and the degree of urbanization are particularly important.     

Off-farm labor supply responses to permanent and transitory farm income

A sample of Iowa farm couples is used to evaluate whether off‐farm labor supply decisions respond to permanent and transitory components of farm income. Off‐farm labor supply of both spouses declines in response to increases in permanent farm income. Farm wives also reduce off‐farm labor supply in response to positive transitory farm income shocks. Consequently, one mechanism farm households use to smooth their goods consumption when facing fluctuating farm income is to modify their consumption of leisure. Ability to smooth goods consumption does not imply the absence of liquidity constraints among farm households unless leisure consumption is also smoothed.     

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.     

Off‐farm labor market decisions and agricultural shocks among rural households in Kenya

Using household level data from rural Kenya, this article explores whether and how farm households respond to unfavorable agricultural production environments, including any ex post adjustments in off‐farm labor supply in response to unexpected weather shocks. While controlling for a wide range of educational, demographic, and other locational factors, we examine how long‐term weather conditions and specific rainfall shocks influence a household's decision to engage in, and their earnings from, the off‐farm labor market. We find that rural households engage in off‐farm work as a long‐term strategy to deal with the effects of anticipated weather conditions on their farming operations. The analysis does not reveal major short‐term adjustments in off‐farm engagement as a result of specific, unexpected rainfall shocks; these households do however rely on remittance income and petty agricultural wage labor under these circumstances. Holding other factors constant, and conditional on participation, households in areas with a more productive local agriculture tend to earn more from off‐farm work especially in the informal/business sector than their counterparts in regions with a less productive agriculture. As expected, a vibrant local economy in the form of public investment increases the probability of off‐farm participation.     

Income Diversification of Rural Households in China

This article examines how different patterns of farm‐level diversification affect the income levels of rural households in China. Using quantile regression analysis of data from a rural household survey, the empirical results exhibit significant differences in diversification effects across rural income strata and various structural characteristics. Diversification, especially involving nonfarm employment and migration, brings a monetary premium to low‐income rural families and an income discount to high‐income families. The policy implications suggest the encouragement of labor‐intensive enterprises in rural areas and improvement of labor quality through rural education and training programs.     

Effect of off‐farm income on smallholder commercialization: panel evidence from rural households in Ethiopia

This article investigates how off‐farm income affects crop output market participation decisions and marketed surplus of smallholder farmers in Ethiopia. A double‐hurdle model is estimated using three waves of panel data from the Ethiopian Rural Household Survey. Unobserved heterogeneity is controlled for using a correlated random effect procedure and potential endogeneity of explanatory variables using a control function approach. The results show that off‐farm income has no significant influence on household crop output market participation. However, conditional on market participation, additional off‐farm earnings negatively affect the marketed surplus. This indicates that farmers use off‐farm earnings for consumption rather than for investment in agricultural production. Policy measures that promote rural investment may help increase returns to labor for land‐poor households participating in off‐farm work in the process of agricultural commercialization.     

Welfare implications of reduced government subsidies to farm families: accounting for fringe benefits

In the past three decades, farm families have relied on government payments and off‐farm income to reduce income risk and increase total household income. Studies have shown that, as the income effect dominates, government payments tend to reduce off‐farm labor of farm operators and spouses. But that may not be true if one accounts for fringe benefits associated with off‐farm employment. Additionally, with looming budget deficits and the possibility of a reduction in decoupled government payments, farm families may be facing an altered economic environment. Our study addresses this issue by examining the links between government farm program payments and the ever‐important role of fringe benefits in the off‐farm employment of farm couples. Results from farm‐level data actually show that the marginal effect of government payments on hours worked off‐farm will decrease in magnitude when accounting for fringe benefits, ceteris paribus. These results support the notion that farm households’ welfare loss stemming from reduced decoupled payments may be overstated when models exclude fringe benefits from the estimation of off‐farm labor supply.     

Smallholder participation in vegetable exports and age‐disaggregated labor allocation in Northern Tanzania

Modern agricultural supply chains have been playing an increasingly important role in developing countries and have had significant effects on rural labor markets. This article analyses the effects of smallholder farmer participation in export vegetable supply chains in Northern Tanzania on both household hired labor demand and off‐farm labor supply, using an age‐disaggregated approach. In our sample, neither separability nor exogeneity of smallholder farmer participation in export supply chains can be rejected. Hence, we apply lognormal double‐hurdle models and find that participation in export supply chains positively affects households’ decision to hire labor from all age groups. We also find that it increases the unconditional overall level of hired labor demand, while the age‐disaggregated analysis shows that these effects mostly benefit rural youth. However, our sample does not allow us to establish statistically significant evidence of an effect on household off‐farm labor supply although the point estimates point to nonnegligible positive effect sizes.     

Cash crop liberalization and poverty alleviation in Africa: evidence from Malawi

This article uses the case of burley tobacco liberalization in Malawi to investigate the efficacy of cash crop liberalization as an instrument for poverty alleviation in sub‐Saharan Africa. The principal justification for cash crop liberalization is that markets allow farm households to increase their incomes by producing that which provides the highest return to their productive resources and use the cash to buy consumption goods. Using a latent welfare model, we find that households that selected to grow cash crops had higher incomes than those that did not grow cash crops. However, we also find that due to the lumpiness and seasonality of cash crop incomes, higher household incomes, while increasing food purchases did not significantly affect per capita food intake. Irrespective of participation in cash crops, for much of the cropping season rural households seem to rely more on nonfarm income for expenditure and consumption smoothing.     

Off-farm work decisions on Dutch cash crop farms and the 1992 and Agenda 2000 CAP reforms

A double hurdle model of off‐farm work participation and off‐farm labour income was derived and estimated consistent with a farm household model. It was found that rationing and unexpected transaction costs inhibit farm households from participating in off‐farm work. The 1992 and the Agenda 2000 CAP reforms are most likely to increase the off‐farm employment of arable farm households, but its full effect cannot be realised because of inhibitions to enter off‐farm activities. Household and farm characteristics have different impacts on off‐farm work participation and on the level of off‐farm labour income.     

Agricultural Commercialisation and Nutrition in Smallholder Farm Households

Commercialisation of smallholder agriculture is important for rural economic growth. While previous studies have analysed effects of commercialisation on productivity and income, implications for farm household nutrition have received much less attention. We evaluate the effects of commercialisation on household food security and dietary quality with a special focus on calorie and micronutrient consumption. We also examine transmission channels by looking at the role of income, gender, and possible substitution effects between the consumption of own-produced and purchased foods. The analysis uses survey data from farm households in Kenya and a control function approach. Generalised propensity scores are employed to estimate continuous treatment effects. Commercialisation significantly improves food security and dietary quality in terms of calorie, zinc and iron consumption. For vitamin A, effects are insignificant. Commercialisation contributes to higher incomes and increased nutrients from purchased foods, but it does not reduce the consumption of nutrients from own-produced foods. Enhancing market access is important not only for rural economic growth, but also for making smallholder agriculture more nutrition-sensitive.     

Health care expenditures of self‐employed farm households in the United States

For self‐employed individuals and their families, purchases of health care services and health insurance policies have the potential to impact their health status, as well as the financial viability of their businesses. Most people in the United States receive health insurance coverage through employer‐sponsored programs. Self‐employed individuals and their households, such as farm households, may face a greater challenge in getting affordable health insurance. Using a large cross‐sectional farm household level dataset, we estimate the impact of the source of health insurance on health care expenditures of farm households in the United States. Results suggest that farm households purchasing individual health insurance directly from vendors are likely to spend more on health care than those with other sources of health insurance. After controlling for a variety of personal and local area characteristics, having health insurance was negatively related to total health care expenditures. Age and income, not surprisingly, were also found to be significant in explaining health care expenditures.     

How has microcredit supported agriculture? Evidence using panel data from Bangladesh

Improving agricultural productivity has received a greater attention in recent years amid concerns about rising food insecurity, population pressures, and climate change. Many believe that better access to institutional credit, spanning microcredit as well as commercial and agricultural banks, can help rural households smooth risks, and access inputs and other technology to modernize agriculture and improve farm/nonfarm linkages. We use recently augmented household panel data spanning over 20 years in Bangladesh to examine the effects of rural credit expansion (both microcredit and formal bank channels) on outcomes for agricultural households. We find that microcredit has benefited households with lower landownings, raising agricultural income from activities such as livestock rearing that require less land, as well as nonfarm income diversification for all households, but with the strongest effect for landless or near‐landless households. We do not find effects of microcredit on crop income, but do, however, find that reported supply‐side credit constraints significantly lower crop income. Borrowing by both men and women has contributed to nonfarm income growth for marginal farmers, but only men's borrowing has contributed to nonfarm income growth among higher landowning groups.     

Off-Farm Employment and Grain Marketable Surplus in China

This paper examines the effects of off-farm employment on grain marketable surplus supply during the reform period in China. A theoretical framework demonstrates that farm households' supply behaviour depends not only on the profitability of farm production but also on alternative off-farm wage opportunities of household members. An empirical model, which assumes full income maximisation of farm households, simultaneously evaluates the effects of on-farm and off-farm income on their grain supply behaviour. Particular attention is paid to the effect of off-farm income through a comparison of conditional and unconditional grain marketable surplus supply elasticities. Results show that off-farm income had a strong negative effect on grain marketable surplus from farm households following liberalisation of factor markets in China and that this could lead to a loss of marketable surplus supply.     

Impacts of price and productivity changes on banana‐growing households in Uganda

This article compares the effects of changing market prices and farm productivity on the welfare of banana‐growing households in the Ntungamo district of Uganda. A heterogeneous‐agent model is applied via a series of mathematical optimization problems, to simulate production and consumption responses of 70 farm households surveyed in 2006. Results show that a given increase in productivity has a greater impact on poverty alleviation than that same increase in market prices. Despite the effects of productivity gains being comparable across different types of household groups, price improvements primarily benefit the incomes of households who are involved in rural producer organizations, who are located closer to markets, and who sell at the market.     

Farm households and nonfarm activities in Ethiopia: does clustering influence entry and exit?

This article examines how clustering affects the entry and exit decisions of farm households into and from nonfarm enterprises in rural Ethiopia. We find that the existence of clusters of microenterprises in the same district increases the likelihood of a rural household to start a nonfarm enterprise. Similarly, clustering of big manufacturing firms in the same zone is found to increase the likelihood of farm households to start a nonfarm enterprise. Nonfarm enterprises operating in clusters are also found to have a lower probability of exit than those operating outside of clusters. The study further investigates the impact of entry and exit into and from nonfarm enterprises on farm household's well‐being using as indicators total household income, the food security status of a household, and the household's ability to raise enough money in case of emergency. Using propensity score matching to account for selection bias, we find that entry into nonfarm enterprises significantly increases household's income and food security status. Exit from nonfarm enterprises, on the other hand, is found to significantly reduce household's income.     

Market imperfections,liquidity, and farm household labor allocation: the case of rural South Africa

Asset endowments and market imperfections shape households’ labor allocation decisions and lead to different production regimes within rural farm households in South Africa. This article uses a farm household model to explain the presence of three main household groups determined on the basis of the labor regime adopted: small peasants (working both on and off farm), self‐cultivators (autarkic in labor) and hiring‐in households. A partial generalized ordered logit is used to test the main predictions of the model and a Brant test on threshold constancy is performed to identify the household‐specific factors affecting labor market participation. The results show that liquidity constraints and market imperfections matter in the choice of the labor strategy adopted. Liquidity‐constrained households are more likely to sell labor off farm while access to information facilitates the hiring in of workers.     

Off‐farm work and technical efficiency on U.S. dairies

In this study, we investigate the impact of an increase in farm households’ off‐farm work on technical efficiency (TE) of U.S. dairies. We present a theoretical framework that implies that an increase in farm household off‐farm work decreases TE. We use two nationally‐representative samples of U.S. dairies (2010 and 2005 Agricultural Resource Management Surveys) and a parametric approach (stochastic frontier analysis) to empirically test the hypothesis. Results are generally consistent with the hypothesis and show that an increase in off‐farm work by the farm household is associated with a significant decrease in TE. In addition, results show that there is a statistically significant difference in TE between small, medium, and large farms. Small farms are associated with significantly higher off‐farm work and have lower TE than large farms, which implies that less off‐farm work by households with larger farms is at least partially responsible for the evidence of economies of scale in the U.S. dairy industry.     

Off‐farm work,land tenancy contracts and investment in soil conservation measures in rural Pakistan

This study examines the impacts of participation in off‐farm work and land tenancy contracts on the intensity of investment in soil‐improving measures and farm productivity. A multivariate Tobit model that accounts for potential endogeneity between the intensity of investment and the off‐farm work and tenancy contract variables is estimated for 341 rural households in Punjab province of Pakistan. An instrumental variable approach is also used to analyse the impact of tenancy contract and off‐farm work on farm productivity. The empirical results show that participation in off‐farm work and tenure security tends to increase the intensity of investment in long‐term soil‐improving measures. We also find that increases in off‐farm work and tenure security exert significant and positive effects on farm productivity.     

Changing food consumption patterns in rural and urban Vietnam: Implications for a future food supply system

Rapid income growth and urbanisation could significantly change the composition of the food basket in many emerging economies. This study estimates a demand system, including 15 major food items in Vietnam, with multiyear household survey data. We find a large variation in the estimated price elasticities (–0.05 to –0.88) and expenditure elasticities (–0.16 to 2.56). Food types, urban status and income groups can explain this variation. We also find that the staple food, rice, is already an inferior good for rich urban households in Vietnam. Moreover, food preferences are evolving away from rice but towards animal proteins (fish, pork, chicken, eggs and milk), fruits and vegetables, irrespective of urban status and income groups. As the Vietnam economy continues to grow with a doubling of gross domestic product (GDP) in the next decade, per capita rice consumption in both urban and rural areas and across different income groups will continue to decline, whereas demand for other high‐value products will rise. Thus, government policy should focus on encouraging demand‐oriented food production. In addition, crop diversification at the farm level needs to improve substantially to meet the rising demand for these food products due to income growth and urbanisation.