Farms, farm households, and productivity of resource use in agriculture

Farms are seen and analyzed by contemporary agricultural economics as firms producing farm products only. Although most farms in western countries are managed by farm families, the economics and economic implications of family farms as the dominant institution in agriculture are neglected almost totally. In the article, first, a simple model of family farms is developed where resources available are supplied by the farm household whereas the farm is demanding such resources, however, in competition with efficient resource use outside that farm. Modifications of the micro-theory of the family farms due to imperfect instead of perfect labour and land markets are presented as well. Next, implications of the farm as a correlate of the farm household for income and productivity of resource use in agriculture are discussed. Finally, further consequences with respect to agricultural policy are mentioned.