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Abstract
Statistical data on labour productivity and income in agriculture reveal large discrepancies between
various EC member states, both with respect to their absolute levels and in relation to nonfarm
productivity and income in the respective countries. Insofar as they appear to reflect the
failure of markets in allocating agricultural resources efficiently, and seem to be inconsistent with
conventional wisdom concerning structural adjustment of agriculture, however, it can be seen that
those data are misleading to a large extent. Based on a simple model of optimal time allocation
between farm and non-farm activities of members of farm households, it is demonstrated that
farm labour productivity and income must be different according to differences in the relation of
farm to non-farm labour supply. The implications concerning international, interregional, intersectoral
and intertemporal comparisons of income and productivity are discussed as well as the
relevance of market failure in agriculture.