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The agricultural household's discrete decision of whether to participate in coarse grain markets is separated here from the continuous decision of how much to sell or buy, conditional on participation. Failure to participate in markets results from high fixed transactions costs. A selectivity model endogenously switches households into alternative market participation states, correcting for bias caused by the exclusion of unobservable variables affecting both discrete and continuous decisions. Improved market information increases the probability of participation by sellers, while access to cereals‐processing technology increases quantities transacted by both sellers and buyers, conditional on participation.

We identify the effects of alternative explanatory variables on the propensity of U.S. farmers to cease farming, with a particular emphasis on understanding the roles of off-farm employment and federal farm program payments. Conventional ordinary least squares analysis using all counties suggests that off-farm employment has no statistical effect on the (net) number of farmers quitting between 1987 and 1997, ceteris paribus. A more refined analysis, which separates counties losing farmers from those that gained farmers, reveals subtle and less clear-cut effects of off-farm employment (and federal program payments) on farm exits. Copyright 2001, Oxford University Press.

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County-level, Non-farm proprietor employment density, Spatial effects, L26, J24,