Allocating Farm Resources between Farm and Nonfarm Uses

Abstract

The purpose of this paper is to provide a theoretical foundation for explaining the rationality of allocating traditional "farm resources" to nonfarm employment. This is a first step towards including nonfarm employment of farm resources in micro and macro models of structural adjustment and production response to changes in economic stimuli. The theoretical model is developed around the use of operator's labor at the farm level. It demonstrates the conditions under which farm operators can combine farm and nonfarm employment to maximize income and explains, in a familiar theoretical context, the attractiveness of part-time farming as a permanent or as a transitory organization of resource use. AGRICULTURAL economists are becoming increasingly aware that f i more attention should be focused on nonfarm employment of what have traditionally been called "farm resources." In the last decade nonfarm employment has been a growing source of income to farm people. This paper shows, with the aid of diagrams, that the decision by a farm operator to allocate part of his resources (chiefly labor) to nonfarm employment may be both rational and consistent with the goals of maximizing family income and making efficient use of farm and family resources. The analysis is restricted to resource allocation at the farm level and deals primarily with farm labor, but the same principles apply to other resources.No model of part-time farming can reflect the total complex of forces which determine how each farm operator will use his resources. But a simple, logical model should serve as an effective base from which to probe the myriad of motivations behind a farm operator's decision about how much of his resources to allocate to nonfarm employment.A basic assumption leading to the model which follows is that farm enterprise alternatives are typically subject to diminishing physical and economic returns (nonfarm alternatives are not) within the usual ranges of experience. Other initial assumptions are that: (1) agriculture is an industry of perfect, atomistic competition so that the decisions of anyone operator do not have a perceptible influence on aggregate demand, supply and prices; (2) the farm under analysis starts with a given stock of capital, land, labor, and other resources; (3) farmers' indifference schedo I am indebted to Ronald

Stability of Farm Income and the Role of Nonfarm Income in U.S. Agriculture

“…However, Lee;Huffman;and Ahearn (1986) have noted that working off the farm by farm operators is also related to the opportunity cost of time, and human capital investments.…”

Accessibility and Ownership of Financial Accounts by Married U.S. Farm Women

“…Wilkening and N. Ahrens in 1979 at the annual meeting of the Rural Sociological Society, Burlington, VT units. Later, Lee (1965) provided a theoretical foundation for explaining the rationality of allocating traditional farm resources to nonfarm use. Recently, Harl (1983), in an address to the American Agricultural Economics Association, urged that social and political, as well as economic, factors be included in agricultural economic analyses.…”

Nonpecuniary Benefits to Farming: Implications for Supply Response to Decoupled Payments

“…There is an established literature considering the allocation of farm household labor (e.g., Lee 1965;Gronau 1977;Sumner 1982;Lopez 1984;Singh, Squire, and Strauss 1986). In the basic model, farm households choose between leisure and labor on and off-farm to maximize utility-workers are indifferent between working on and off-farm at the same wage rate.…”