Stability of Farm Income in a Stabilizing Economy
1964
Firch, Robert S.
T. W. Schultz and D. G. Johnson in the early post World War II period identified the unstable general economy as the major source of the instability of farm income and stressed the importance of the stabilization of the nonfarm economy. Results of an extensive empirical investigation of the relationships among the variances of farm income, national income, and farm output for the period 1913 to 1962 is reported in this paper. The role of the automatic stabilizers in stabilizing disposable income relative to national income is examined for the same period. The research reported in this article associates most of the instability of farm income over the past 50 years with instability of nonfarm income. This source has been essentially eliminated by structural changes in the general economy in line with recommendations by Schultz and Johnson. The increased stability of the general economy seems more than sufficient to explain the recent stability of farm income.
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