Off-Farm Income and Farm Capital Accumulation: A Farm-Level Analysis

An intertemporal model in which farm capital accumulation and work choices by a single-agent farm household are interdependent is developed and tested using a farm-level data set. Estimation is done using a recursive two-step simultaneous censored equations model. The results of this study are of relevance for an understanding of structural change within the agricultural sector as they point toward the emergence of a dual farming structure and rigidity in off-farm work adjustments. Our findings suggest that off farm income reliance is associated with a farm asset disinvestment strategy, that there is rigidity in off farm income reliance, and that factors explaining farm capital growth indirectly affect the off farm reliance.