Decomposition of Variability in Farm Household Assets and Debt
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Farm families often hold large quantities of wealth and, like any other family, assess
their financial progress by reviewing their net worth (or wealth) position periodically.
Wealth has an impact on many decisions such as production, retirement, and
succession of the farm. Households, in general, seek stability growth in wealth and,
ideally, income as well. In the case of wealth, farm households will be better equipped
to handle variability once the contributing sources are identified. This study measures
how much of the variability in farm household assets and debt is attributed to the
variability in farm and nonfarm sources of assets and farm and nonfarm sources of
debt. Using a normalized variance decomposition approach and data from the Agricultural
Resource Management Survey (ARMS), results show that origin of asset
and debt variability differs with farm size and location of the farm household.