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Abstract
For a majority of farm families and operators in OECD countries, off-farm or non-farm occupations
have become a significant source of income and a major determinant of their well being. This study
investigates the use of off-farm employment as a risk management tool by farm operators. A two-part
model is developed to estimate the impact of farm income risk on the decision to participate in
the off-farm labour market and the level of off-farm employment income. Longitudinal farm level
data for about 30,000 Canadian farms from 2001 to 2006 are used for this study. The variability of
farm market revenue is found to positively affect the likelihood of off-farm work and the level of
off-farm employment income, in particular for operators of larger commercial farms. The apparent
ability of a significant number of operators of large farms to increase their resilience and coping
capacity through off-farm employment income suggest the presence of substantial interactions
between off-farm income and farm income stabilization policies. Consequently, the focus of
agricultural policies on risk management and income stabilization reinforces the linkages between
rural and agricultural policies. In particular, it appears that policies designed to facilitate access to
off-farm work or to enhance off-farm opportunities, such as rural development programs, could
contribute to achieve some objectives underlying agricultural income stabilization programs. These
results reinforce the need for coherent rural and agricultural policies, and raises questions about the
desirable balance between placed based rural policies and sector specific agricultural policies.