Off-Farm Income and Risk Reduction in Agriculture: When Does It Matter?

Hans Andersson, B. Sailesh Ramamurtie, and Bharat Ramaswami
Federal Reserve Bank of Atlanta
Working Paper 95-14
November 1995

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Investment behavior is analyzed using a dynamic portfolio model including off-farm income. The correlation structure of off-farm income and asset returns and the ratio of off-farm income to wealth is shown to affect portfolio choice. Empirical analysis indicates that off-farm income tends to increase farm assets.

JEL classification: D51, D52, G12, J30