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

According to neo-classical theory, farmoperators’ labour allocation is determined by therelative wage they can earn from their labour on and offthe farm. At the equilibrium, time should be allocated sothat the marginal returns from on- and off-farm workare equal. Thus, a move from coupled to decoupledpayments should have important impacts on labourallocation, as it reduces the return to farm labour andincreases the unearned income of operators. However,empirical studies on decoupling have shown so far onlylimited impact from decoupling and sometimescontradictory findings. In this paper, individualpreferences and constraints are taken into account to tryand identify potential barriers to labour allocationadjustment. Empirical analysis based on the intentionsto adjust to decoupling of a sample of French farmersconfirms a limited impact of the change in policy andcalls for further investigation of the potential barriers toadjustment.