Estimating permanent income and wealth of the US farm households

Abstract

Farm households are unique in the way they derive income when compared to nonfarm households. Farm operators and spouses have dual income sources, from farm and off-farm activities. Further, farm households on an average possess higher wealth than nonfarm households. This article estimates permanent income for the US farm households using data from a large national farm level survey. The estimated income is then used to identify the determinants of wealth accumulation by the US farm households. Results confirm that permanent income is closely related to age of the operator, education, occupation, farm size, location and number of earners in the household. Along with age, permanent income is a significant determinant of household wealth. It was also found that the wealth-income curve is nonlinear, upward sloping, and convex. Hausman's specification test indicates that variations in farm household wealth is better explained by estimated permanent income than observed total household income. Off-farm income cannot be treated as residual or transitory income.

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

“…These programs include crop insurance for selected crops, gross margin insurance for dairy cattle, and safety‐net programs for covered commodities (e.g., Price Loss Coverage [PLC], Agricultural Risk Coverage [ARC], and Margin Protection Program for Dairy [MPP‐D] which was renamed Dairy Margin Coverage in the 2018 Farm Bill). Within this framework, farmers make decisions and implement strategies to mitigate risks and reduce income volatility such as using futures and options markets as well as savings to finance production (Mishra & Paudel, ) or engaging in agritourism (Khanal & Mishra, ).…”

Performing a New England landscape: Viewing, engaging, and belonging

“…In this study, full-time farmers were those individuals who said they received 100% of their income from farming. While we recognize the complex and important role off-farm incomes play in family farm economies (see for example Donovan and Poole, 2014;Krammer et al, 2012;Meert et al, 2005;Mishra and Paudel, 2011;Pilgeram, 2011;Qasim and Knerr, 2013; van Leeuwen and Dekkers, 2013), our goal was to better understand how individuals perceive and engage with landscape based on their own personal identities and experiences. Therefore, we allowed people to self-identify as full-time farmers and did not interrogate the economic strategies of their households or farm businesses.…”

What may determine off-farm income? A review

“…They noted that the "estimated permanent income" may be useful for the explanation of "the variations in household wealth". Results of the empirical studies of Mishra and Paudel (2011) show that the participation in the farm commodity programs reduced the price variability -the positive coefficient of the variable describing government payments. On the other hand, the off-farm income was a statistically significant determinant of the 'total household income' and the 'farming income' , respectively.…”

“…Another aspect was explored by Mishra and Paudel (2011), who investigated the concept of the "permanent income" of the U.S. farm households. They noted that the "estimated permanent income" may be useful for the explanation of "the variations in household wealth".…”