The Effects of Metropolitan Residence on the Off-Farm Earnings of Farm Families in the United States1

Abstract

Previous research on the effects of urbanization on farming and farm families has focused on the consequences of urban expansion on farming practice rather than on the well-being of farm families. Proximity to urban areas has been found to alter the way farm families utilize the nonfarm labor market. In this study, the off-farm earnings of husbands and wives in farm families are compared across metropolitan (metro) and nonmetropolitan (nonmetro) areas using data from the March supplement to the 1989 Current Population Survey. Censored regression models (tobit) and decomposition are used to demonstrate the effects of nonfarm labor market differences on off-farm labor force participation and earnings. The analysis reveals that farm family members, as expected, have significantly higher rates of participation and earnings in metropolitan areas. But this analysis also reveals that increases in off-farm participation are likely to have a larger effect on total off-farm earnings in nonmetropolitan areas than returns to those already working off-farm. The potential for increases in off-farm earnings will be underestimated in nonmetro areas when changes in participation in the off-farm labor market are not taken into account.