Determinants of Net Farm Exits: A County-Level Analysis

Abstract

This study uses multivariate regression analysis to estimate which factors significantly contribute to net farm exits from 1997 to 2006. The dependent variable is percent change in farm proprietorships and separate analyses are conducted for all counties and for the sub-sample of counties that experienced net losses of farm proprietorships from 1997-2006. Counties where a greater percentage of farm operators worked off-farm 200 days or more had lower rates of net exits. This was true in the total sample and in the net-loss county sub-sample. Government payments slowed the rate of net exits in both the full and sub-sample, but although statistically significant, the regression coefficients were so small, that payments do not appear to have been of economic significance. Measures of urban influence and population density contributed to faster rates of exit. Farm property values and extent of irrigation were also associated with faster rates of exit. This may because water rights are a valuable asset that can be sold, thus increasing gains from exiting farming. Likewise, demand for agricultural land for development may bid up the value of agricultural property. Finally, state fixed effects greatly enhanced model goodness of fit and coefficients were highly significant. State effects were important even when including variables for regional differences in agricultural specialization and climate as controls. Moreover, the impact of these state effects on net exit rates was large relative to other explanatory variables. This suggests that examining differences in state level policies that affect net farm exits may be an important area of future research.