Farm labor and farm income: case study from Norway

Seeking the answer to the question of how farmers allocate their limited labor resources has a long tradition in the agricultural economics literature (Schultz 1990, Benjamin 1992). The role of off-farm income to close the income gap between farm households and non-farm households has been emphasized by various scholars (e.g. Schmitt 1989, Gardner 1992, Mishra et al. 2002). Ahearn et al. (2006) focus on the role of government subsidies on the allocation decision. This chapter contributes to this literature. In particular, we investigate the relationship of farmers’ decisions to combine farm income with off-farm wage income and to what extent this affects their total household income. To this end, we combine taxpayer information and agricultural data at the farm household level to study labor decisions and the income of Norwegian farm households and compare with the income situation of all households. Using data of almost 40 000 farm households for the year 2009, we find that farm households obtain an income that is on average larger than that of all Norwegian households. However, there is a large variation. Descriptive statistical analysis looking at joint distributions of key structural variables, policy support and income at farm level provides unique information.