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

Abstract

We develop a household model wherein farmers allocate labor to maximize utility from leisure, consumption, and nonpecuniary benefits from farming. The model shows that farmers with decreasing marginal utility of income respond to higher decoupled payments by decreasing off-farm labor and increasing farm labor, resulting in greater agricultural output. We then estimate the difference between farm and off-farm returns to labor using data from three nationally representative farm household surveys. The finding of a large on-farm/off-farm wage differential provides compelling evidence of substantial nonpecuniary benefits from farming. Copyright 2009, Oxford University Press.

Capitalization of the Single Payment Scheme into Land Value: Generalized Propensity Score Evidence from the European Union

“…In the European Union the 2003 CAP reform replaced the previous subsidy system linked to the level of animal production and crop land use (so called coupled subsidies). Several studies, however, find that even decoupled subsidies may still affect farms' production decisions and factor allocation and thus may not be fully in line with the WTO requirements (Lagerkvist 2005;Ahearn, El-Osta, and Dewbre 2006;Goodwin and Mishra 2006;Vercammen 2007;Key and Roberts 2009;Whitaker 2009;Ciaian and Swinnen 2009;Bhaskar and Beghin 2010;Carpentier, Gohin, and Heinzel 2012). Our results confirm these findings: the decoupled SPS induces distortions in factor markets through altering farmers' land marginal decisions (reflected through their impact on land rental prices).…”

Explaining the persistence of low income and environmentally degrading land uses in the Brazilian Amazon

“…In addition to improving the mechanisms by which household needs are assessed, policy makers should pay more attention to the diverse and changing social objectives of rural households (Pannell et al 2006, Greiner et al 2009, Key and Roberts 2009. Existing attempts at cattle intensification via pasture recuperation and crop integration throughout Brazil have been held back, in part, by a failure to appreciate the importance of cultural barriers and create knowledge systems that effectively communicate the financial viability and technical specifications of these systems (Gil et al 2015).…”

“…Agricultural activities generate many benefits beyond income, such as lifestyle, spiritual value, social connections, and independence. Consequently, improved economic outcomes do not always translate into improved well-being and agricultural activities are often an end into themselves, not just a means to an end (Beckley 1995, Key and Roberts 2009, Knight et al 2009). For this reason, a person's subjective well-being (one's perception of well-being measured as the response to questions regarding, for example, their level of happiness and satisfaction) can offer a more holistic measure of how well-off households are compared to that which is possible when only assessing monetized measures such as consumption, income, or savings (Diener and Seligman 2004).…”

Does the single farm payment affect farmers' behaviour? A macro and micro analysis

“…However, it has also been reported that the actual effect is unlikely to be as drastic as farmers engage in production for non-economic as well as economic motivations. That is, in contrast to 'homoeconomicus' strategies which assume that farmers behave absolutely rationally and only have profitmaximisation in mind, there are likely to be a variety of non-monetary benefits from farming that can influence their activities (Kantelhardt, 2006;Key and Roberts, 2009).…”

“…Vanclay (2004) asserts that farmers seek to make a reasonable income with each farmer defining what is reasonable for themselves and that the additional lifestyle factors associated with farming compensate farmers for those times when income may be less that what they could achieve in other endeavours. Key and Roberts (2009) and Key (2005) describe how attributes associated with farming such as independence and pride associated with business ownership are valuable to farmers and these attributes may not be observable in other types of employment. Outside of agriculture it has been widely reported that the self employed, all things being equal, report much greater levels of satisfaction with their jobs (Hamilton, 2000).…”