Many US farm households have several income sources, including farm production, off-farm employment, and government payments. ERS research suggests that farm households may employ "mental accounting" to decide which income sources, including different types of government payments, are most appropriate for household expenses. ERS Research, using data from USDA's 2003-2005 Agricultural Resource Management Survey, found that increases in relatively stable non-farm income have a greater impact on farm household spending than do increases in farm production income, which can vary from year to year because of weather effects, crop failures, animal losses, and/or commodity price fluctuations. Income variability, however, does not fully explain the effect of different types of government payments on household spending.
MARKETS AND TRADE F I N D I N G S SEPTEMBER 2009 Income Source Matters in Farm Household Spending 3 Jupiterimages A M B E R WAV E S Many U.S. farm households have several to year because of weather effects, crop fail- may be that because countercyclical payments income sources, including farm production, off- ures, animal losses, and/or commodity price are not tied to current production, but rather farm employment, and government payments. ﬂuctuations. to historic (base) acreage like ﬁxed direct pay- ERS research suggests that farm households Government payments also include both ments, farm households consider them in the may employ “mental accounting” to decide stable and variable types of income, and as same mental account as ﬁxed direct payments which income sources, including different with other income sources, farm households and therefore available for household uses. By types of government payments, are most ap- do not consider all government payments to contrast, farm households may consider income propriate for household expenses. be the same. Increases in variable government from source
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