FARM HOUSEHOLD LABOR ALLOCATION AND HIRED LABOR DEMANDS IN THE MIDWEST U.S.: THE IMPACT OF GOVERNMENT PAYMENTS
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In addition to farm work, most farm households in developed countries have at least one
person working off-farm. The purpose of this paper is to examine if, and how,
government payments, personal characteristics and household characteristics affect labor
allocation of farm operators and their spouses, and the decisions to hire labor. We
estimate an 8-regime multinomial logit model and a three equation multivariate probit
model to quantify these impacts. Results indicate that age of household members is
consistent with the life-cycle hypothesis on increasing then decreasing labor market par,
and is positively associated with demand for hired labor. Hired farm labor and off farm
activities increase with the operator education levels. As household size increases, a
household member is more likely to work off the farm. Increasing net worth is found to
have a positive impact on probability of spouses working on the farm as well as hired
labor being used. Both coupled and decoupled payments increase demand for hired labor
which is consistent both with farm expansion and reduced family labor time on the farm.