The literature on part-time farming suggests that off-farm income reduces risk and improves resilience. Our paper challenges this popular view. Our hypothesis is that the pursuit of off-farm activities may have negative effects on farm productivity by reducing scale and dissipating the gains from labour specialization. These productivity losses may more than offset the benefits derived from risk diversification. If this hypothesis is correct, we should observe that farmers who rely more intensely on off-farm income are also the ones least likely to adopt scale-expanding production strategies when faced with unexpected challenges. Using recent survey data from Australia, we examine the strategic reaction of farmers affected by major challenges such as drought and price volatility, distinguishing between adoption of defensive and offensive adjustment strategies. We find that off-farm income significantly reduces the likelihood of adopting offensive adaptation strategies, which supports our working hypothesis.


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