Does Participation in the Conservation Reserve Program and Off-Farm Work Affect the Level and Distribution of Farm Household Incomes?

Using a national survey of U.S farm households, this paper investigates the interrelationship among the decisions to work off the farm by the operator and the spouse, and participation in the Conservation Reserve Program (CRP). The effects of these three decisions on farm household income are also examined. By estimating a heteroscedastic household income function, we identify the effects of participating in these activities on the average level of farm household income and its variation within each sub-group of farms involved in the several combinations of activities. Our empirical results support the hypothesis that participation in the CRP and decisions to work off the farm by the operator and the spouse are made jointly rather than independently. The operators' decisions to work off the farm and to participate in CRP increase the mean level of the household income, while the spouses' decisions to work off the farm help decrease the variation in household income among households in that sub-group.