The Common Agricultural Policy and the Farm Households’ Off-Farm Labour Supply

The Cap and National Priorities within the EU Budget after 2020, ed. M. Wigier, A. Kowalski, series "Monographs of Multi-Annual Programme" no 75.1, IAFE-NRI, Warsaw 2018; ISBN 978-83-7658-751-6

25 Pages Posted: 22 Jan 2019

See all articles by Jason Loughrey

Jason Loughrey

Teagasc Rural Economy and Development Programme

Thia Hennessy

University College Cork - Cork University Business School

Date Written: 2018

Abstract

The economic sustainability of farm households is frequently dependent on the availability of off-farm employment. This paper uses farm-level data to examine the impact of the Common Agricultural Policy (CAP) direct payment scheme, farm household characteristics and agricultural market conditions on farm households’ labour allocation decisions in Ireland. Among other things, the hypothesis that decoupled direct payments induce farm household members to allocate more time to off-farm employment is tested. The analysis presented here suggests that decoupled direct payments are significantly and negatively associated with both the probability and amount of time allocated to off-farm work in the case of the farm operator. For married couples, the analysis finds a negative relationship between decoupled payments and the probability of both the farm operator and the spouse working in off-farm employment. Interestingly, decoupled payments have no significant relationship with the probability of the spouse only working in off-farm employment. This result corresponds to the finding of El-Osta et al. (2008) and suggests that decoupled payments tend to play a very limited role in explaining the off-farm employment decisions of the spouse. This analysis contributes to our understanding about the importance of off-farm labour in supporting farm household income. Furthermore, the analysis contributes to our understanding about the role of the farm spouse in contributing towards farm household income, the farm viability and the relationship between off-farm labour decisions and agricultural policy.

Keywords: off-farm labour supply, direct payments, probit model, multinomial logit model

JEL Classification: J22, J43, Q12

Suggested Citation

Loughrey, Jason and Hennessy, Thia, The Common Agricultural Policy and the Farm Households’ Off-Farm Labour Supply (2018). The Cap and National Priorities within the EU Budget after 2020, ed. M. Wigier, A. Kowalski, series "Monographs of Multi-Annual Programme" no 75.1, IAFE-NRI, Warsaw 2018; ISBN 978-83-7658-751-6 , Available at SSRN: https://ssrn.com/abstract=3309639

Jason Loughrey (Contact Author)

Teagasc Rural Economy and Development Programme ( email )

Athenry
Galway
Ireland

Thia Hennessy

University College Cork - Cork University Business School ( email )

West Wing, Main Quadrangle, College Road
Cork
Ireland

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