Part time farming in Manitoba

Abstract

Part time farmers have long been a factor in the development of agriculture in Manitoba, yet working on the farm and off the farm has been officially discouraged by federal tax statutes, while at the same time the province has been encouraging the creation of more jobs in rural, and primarily farming, communities. This study makes use of a utility maximization approach to modeling part time farming behavior and applies this model to data derived from the Census responses of Manitoba farmers in 1986 and 1991. The impact of a differential tax rate for on farm income and off farm income is modeled as well as the impact of output prices, autonomous transfers, general price levels and factor input prices, and the impact of the off farm wage. The comparative statics are calculated and a series of policy elasticities are computed for each policy instrument defined above. The data support the use of a logarithmic form of estimation in which the Cobb Douglas functional form is applied to both utility and production. In addition, constant returns to scale is assumed which, while removing some of the reaction conditions from the analysis, enables the direct testing of the model with the data available. The data support the use of estimated relationships for policy interpretations. The theoretical signs of the comparative static analysis and the reduced form of the model generally confirm the theoretically expected signs, but also indicate that shifts in utility function parameters may well explain the behavior of part time farmers in Manitoba inasmuch as the production function parameters are found to be stable...