Farm Households' Consumption of Market Facilitation Payments Differed by Farm Type and Year

David J. Williams and Jessica Todd

Amber Waves:The Economics of Food, Farming, Natural Resources, and Rural America, 2022, vol. 2022

Abstract: Farm incomes are volatile and farm households employ a variety of financial strategies to generate the necessary cash flows to maintain a standard of living that is based on their expected average income over time—a process called “consumption smoothing.” Households save, invest, and work fewer hours off the farm when farm income is higher than expected and spend down their savings, borrow, disinvest, or work more at off-farm jobs when farm income is lower than expected. The marginal propensity to consume (MPC) out of income—how much an additional dollar of income increases consumption spending—tells researchers how well households are able to smooth their consumption. The larger the MPC, the less the household is smoothing consumption.

Keywords: Agribusiness; Agricultural Finance; Farm Management; Financial Economics; Industrial Organization; Production Economics (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:ags:uersaw:338873

DOI: 10.22004/ag.econ.338873

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