Do decoupled payments really encourage farmers to work more off farm? A micro-level analysis of incentives and preferences

According to neo-classical theory, farm operators’ labour allocation is determined by the relative wage they can earn from their labour on and off the farm. At the equilibrium, time should be allocated so that the marginal returns from on- and off-farm work are equal. Thus, a move from coupled to decoupled payments should have important impacts on labour allocation, as it reduces the return to farm labour and increases the unearned income of operators. However, empirical studies on decoupling have shown so far only limited impact from decoupling and sometimes contradictory findings. In this paper, individual preferences and constraints are taken into account to try and identify potential barriers to labour allocation adjustment. Empirical analysis based on the intentions to adjust to decoupling of a sample of French farmers confirms a limited impact of the change in policy and calls for further investigation of the potential barriers to adjustment.