Abstract
In the past three decades, farm families have relied on government payments and off-farm income to reduce income risk and increase total household income. Many studies have analyzed the role of government payments; however, little is known about the impact of health insurance coverage on labor allocation. This study builds on previous literature by using copulas to test for dependence in the labor allocation, addressing the importance of fringe benefits to the farm household, and determining how these considerations affect our knowledge of the impact of fringe benefits on off-farm labor. The results indicate that the off-farm hours worked by the operator and spouse are jointly determined; health insurance coverage is an endogenous variable. Using the predicted probability of insurance coverage and joint estimation techniques, we find a positive and highly significant relationship with the hours worked off-farm. Further, we find that both coupled and decoupled payments are negatively correlated with the hours worked off-farm.
Highlights
During the past three decades, self-employed farm households have engaged in dual employment—farm and off-farm work
Findings here suggest that an increase in operators’ offfarm labor supply increases spouses’ off-farm labor supply; we choose to model the impact of health insurance coverage on the off-farm labor supply of farm operators and spouses using a bivariate Tobit model rather than independent Tobit models
Previous research on off-farm labor supply has ignored the role of employer-sponsored health insurance coverage in determining farm operator and spouses’ decisions to work off the farm
Summary
During the past three decades, self-employed farm households have engaged in dual employment—farm and off-farm work. Dual employment has provided a critical income source to a majority of self-employed farm households in the U.S and Western European countries, but in developing economies as well (e.g., [1,2,3,4,5,6]). Economists have investigated several issues— public policy, education, and wealth—that impact the dual employment decisions of self-employed farm operators and/or spouses. Most surveyed farm families claim that off-farm work provides extra, much-needed income to support family expendituresa [2]. Anecdotal evidence suggests that many self-employed business owners and/or their family members work off-farm to provide fringe benefits.
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