Three Essays on the Labor Allocation Decisions of the Modern Farm Family

The goal of this dissertation is to address the role of government payments in the allocation of off-farm labor through three essays. Government payments have been a part of agriculture since 1933 and at no time has the government stated a policy objective of decreasing the agricultural labor force. Using time series data and new econometric techniques, the first essay finds agricultural policy may have an unintended impact on labor migration. Specifically, we find that government payments increased labor migration from the farm. From 1939 to 2007, increased direct government payments resulted in greater migration of labor from agriculture.The second essay assesses the degree of differentiation between family and hired labor. This addresses the ease at which decoupled government payments can subsidize off-farm labor. Intuitively, these forms of farm labor should have different impacts on production. We test this assumption by estimating the elasticity of substitution between hired and family labor using the ARMS dataset. The results provide little evidence to support the homogeneity assumption and further indicate that the elasticity of substitution is unitary under most scenarios.The final essay addresses the determinants of off-farm labor supply by incorporating both modern issues and techniques. The goal of this research is to determine the impact of health insurance coverage and government payments on the off-farm labor supply of the farm operator and spouse. We first test for dependence in the off-farm labor allocation of the operator and spouse using copulas. We then account for endogeneity in the health insurance variable and jointly estimate off-farm labor supply using a bivariate tobit model. The data used in this research is from 2006-2008 Agricultural Resource Management Survey (ARMS). The results of this study show that the off-farm labor supply of the operator and spouse is positively correlated and that there is a highly significant, positive impact of off-farm insurance coverage on the hours worked off-farm. The results further demonstrate the importance of fringe benefits as a component of the total wage and find significant evidence that greater government payments decrease the number of hours that both the operator and spouse work off-farm.