Die Bodenkultur - Journal for Land Management, Food and Environment

W. Schneeberger:

Deriving income possibility curves for farm households

Summary

Farm households often have the following options: full time farming, part time farming or lease the farm. This article presents a graphic model for the optimal allocation of the available working hours to farm activities and employment off- farm. For that purpose an income possibility curve is derived from the on-farm and the off-farm income function of the farm household. Thus the income possibility curve depicts the two income functions on one graph. To find the optimal allocation of the available working hours for on-farm and off-farm activities, a line with the slope -1 is drawn tangential to the income possibility curve. The point of tangency determines the maximum income possible using the resources available. The effect of changing some of the underlying assumptions is analyzed next. Finally the problems associated with deriving an income possibility curve for a concrete farm household are discussed. Key words: theory of farm households, on-farm and off-farm earnings, income possibility curve.