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.