Economic Research Report No. (ERR-36) 53 pp

February 2007

Off-Farm Income, Technology Adoption, and Farm Economic Performance

by Jorge Fernandez-Cornejo

The economic well-being of most U.S. farm households depends on income from both onfarm and off-farm activities. Consequently, for many farm households, economic decisions (including technology adoption and other production decisions) are likely to be shaped by the allocation of managerial time among such activities. While time allocation decisions are usually not measured directly, we observe the outcomes of such decisions, such as onfarm and off-farm income. This report finds that a farm operator's off-farm employment and off-farm income vary inversely with the size of the farm. Operators of smaller farm operations improve their economic performance by compensating for the scale disadvantages of their farm business with more off-farm involvement. Off-farm work reduces farm-level technical efficiency, but increases household-level technical efficiency. And adoption of agricultural innovations that save managerial time is associated with higher off-farm income.

Keywords: Off-farm income, farm households, economic performance, managerial time, scale economies, scope economies, technical efficiency, technology adoption, farm size, Agricultural Economics

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