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Economic behaviour of self-employed farm producers

University of British Columbia

This dissertation proposes a model oriented towards integrating farm households' production and consumption decisions into a unified theoretical and econometric framework. It is argued that some commodities such as household's labour and, in some circumstances, outputs produced by the farm are traded within the household-farm unit. The implication of this is that, in contrast with other forms of economic organization, farm households' utility and profit maximization decisions are not likely to be independent. Thus, the general objectives of the thesis are to develop a model appropriate to estimate farm households' supply and demand responses which explicitly considers the interdependence of utility and profit maximization decisions as well as to formally test the hypothesis of independence using Canadian farm census data. A model which considers two labour supply equations, i.e., on-farm and off-farm labour supply, and five net output supply equations including one aggregated output and four inputs (land and structures, hired labour, animal inputs, and farm capital) has been jointly estimated using Canadian farm data. The main hypotheses tested are independence of utility and profit maximizing decisions and homotheticity of households' preferences. This investigation suggests that utility and profit maximizing decisions are not independent and, moreover, that there are significant gains in explanatory power and efficiency by estimating the consumption (i.e., the labour supply equations) and the production equations jointly. Another finding of the study is that farm households' preferences are not homothetic. Estimates regarding the quantitative effects of changes in cost of living index, output price, wage rates, and other farm input prices on households' on-farm labour supply, off-farm labour supply, and net output supply are provided. Additionally, the effects of farm operators' educational level on their labour supply, output supply, and input demand decisions are also measured.

Text

2010-03-30

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http://hdl.handle.net/2429/23112

Economics

University of British Columbia

Graduate