Document Type

Working Paper

Publication Date


Working Paper Number

WP #03020, July 2003; Old working paper #10643


A sample of Iowa farm couples is used to evaluate whether off-farm labor supply decisions respond to permanent and transitory components of farm income. Off-farm labor supply of both spouses declines in response to increases in permanent farm income. Farm wives also reduce off-farm labor supply in response to positive transitory farm income shocks. Consequently, one mechanism farm households use to smooth their goods consumption when facing fluctuating farm income is to modify their consumption of leisure. Ability to smooth goods consumption does not imply the absence of liquidity constraints among farm households unless leisure consumption is also smoothed.

Publication Status

Published in Agricultural Economics, Vol. 34 no. 1 (January 2006): 59-68.

JEL Classification

E20, J40, D10

File Format



31 pages

Included in

Economics Commons