The Impacts of Off-Farm Income on Farm Efficiency, Scale, and Profitability Cotton Farms

This paper estimates performance measures on cotton farms, following an input distance stochastic production frontier (SPF) approach and compares the relative performance of farm operator households with and without off-farm wages and salaries. We use 2002 to 2014 USDA data for twelve major cotton producing states-Alabama, Arizona, Arkansas, California, Georgia, Louisiana, Mississippi, Missouri, North Carolina, South Carolina, Tennessee, and Texas-- identifying different performance measures. Previous studies suggest that off-farm work influences economic performance—by “improving” managerial performance. We find that off-farm income boosts scale efficiency on larger operations for the data set analyzed, and is also consistent with significantly higher farm and household returns. We also find that the number of hours worked off-farm by the operator contributes to lower technical efficiency but we find no impact on technical efficiency for hours worked off-farm by the spouse (80 percent of total hours worked off-farm).