A tentative understanding of the differentials in incomes between farm and non-farm households among selected OECD member countries

• Agricultural Economics Workshop

Date and Location

Tuesday, May 26, 2015, 4:10 PM - 5:30 PM
ARE Conference Room, 2102 Social Sciences and Humanities

Abstract

In still many developed countries, particularly in the European Union, the argument of low income among farmers is used to justify vast payment transfers to the farm community. This argument is nevertheless poorly documented by lack of data and political determination. This study investigates whether income differentials still prevail between farm and non-farm households in some OECD member countries and, if this is the case, what can explain these income differentials. It uses national household-based budget surveys that are harmonized by the Luxembourg Income Study to calculate first differentials in incomes between farm and non-farm households for about the last four decades since early 1970 depending on the surveyed countries. It then uses an Oaxaca (1973) counter-factual decomposition to generate and test composition and return effects to characteristics of farm and non-farm households on large household samples. This decomposition is corrected for self-selection bias and multicollinearity. The household characteristics are selected following Gardner’s (1992) theoretical frameworks to explain income differentials between farm and non-farm households. Preliminary results for Canada, France, Italy and the United States are shown and discussed. Caveats of this study are outlined and used to suggest methodological refinements.