Early Exit from Business, Performance and Neighbors’ Influence: a Study of Farmers in France

• Agricultural Economics Workshop

Date and Location

Thursday, November 7, 2019, 4:10 PM - 5:30 PM
ARE Library Conference Room, 4101 Social Sciences and Humanities

Abstract

This article examines the influences of economic performance and neighbors’ characteristics on farmers’ early
exit decisions. Using a unique set of social security data describing all French farmers over the years 2004-
2017, we investigate how these influences depend on farmers’ characteristics and their position relative to their
neighbors Probit estimations show that younger farmers and farmers operating smaller farms are more sensitive
to their own and neighbors’ performance. Allowing for an asymmetric comparison effect between farmers and
their neighbors, we uncover a nonlinearity in the influence of own and neighbors’ profit and size. Consistent
with prospect theory and the empirical literature on relative income, farmers below their neighbors’ average are
found to be more influenced by relative profit and size.