Do agricultural subsidies affect the labor allocation decision? Comparing parametric and semiparametric methods

This study estimates off-farm labor supply from farm operators and their spouses using two different estimation procedures and data from the 2006 Agricultural Resource Management Survey. A semiparametric model was found to be better specified to study off-farm labor supply from operators and spouses than the parametric model. Contrary to previous findings, results found using the semiparametric model indicate that neither direct nor indirect government payments have any impact on the off-farm labor supply of farm operators. These findings indicate that existing literature may overstate the impact of farm payments on the economic well-being of farm households.