Abstract

Labour supply of farm households and non labour income Utility maximising allocation of time between leisure and labour would imply to adjust labour supply to the level of non-labour income. Therefore, agricultural support measures that are decoupled from production or working activities, may be expected to decrease the amount of labour supplied by farm households. This article reports an empirical investigation of the labour supply response to variations in non-labour income in a sample of Danish farm households. The sample was partitioned according to a range of characteristics assumed to express features of the households' utility function. Elasticities of labour supply with respect to non-labour income and wages are reported and illustrated by policy scenarios. Results suggest that the magnitude of labour response to decoupled payments may be significantly different between the household groups identified. Policy implications are discussed.

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