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European Review of Agricultural Economics Advance Access originally published online on February 13, 2006
European Review of Agricultural Economics 2006 33(1):49-71; doi:10.1093/erae/jbi035
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© Oxford University Press and Foundation for the European Review of Agricultural Economics 2006; all rights reserved. For permissions, please email journals.permissions@oxfordjournals.org

Simultaneous estimation of work choices and the level of farm activity using panel data

Avner Ahituv

University of Haifa, Haifa, Israel

Ayal Kimhi

The Hebrew University of Jerusalem, Rehovot, Israel

Corresponding author: Ayal Kimhi, Agricultural Economics Department, Faculty of Agriculture, P.O. Box 12, Rehovot 76100, Israel. E-mail: Kimhi{at}agri.huji.ac.il

Received August 2005; Revision received December 2005. We analyse the simultaneous determination and evolution over time of work choices and the level of farm activity, using a panel of Israeli farm households. We estimate jointly a multinomial choice model of work activity and an endogenous switching regression of farm size, accounting for unobserved heterogeneity and correcting for simultaneity bias. Our results imply that some family farms tend to expand over time and specialise in farming, whereas other farm households downsize their farming operation and increase their engagement in the off-farm labour market. Therefore, the size distribution of farms is converging towards a bimodal distribution.

Keywords: farm size, off-farm work, endogeneity, unobserved heterogeneity, panel


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