Off-farm labour and the structure of US agriculture: the case of corn/soybean farms

While the growing importance of off-farm earnings suggests large benefits accrue to farmers from efforts to expand off-farm income opportunities, economic well being also depends on greater efficiency. To comprehensively gauge the economic health of farm operator households' off-farm income is interpreted as an output along with corn, soybeans, livestock and other crops. To accomplish this task two related methodologies were used. First, using 2000 data, a multi-activity cost function was set up to analyse labour allocation decisions within the farm operator household and also to estimate returns to scale and scope. Second, using 1996-2000 data, an input distance function approach was followed to estimate returns to scale, cost economies and technical efficiency - and the relative performance of farm operator households with and without off-farm wages and salaries compared. The cost function and input distance function results both suggest that off-farm outputs and inputs can be modelled in a multi-activity framework and involve significant economies of scope.