Causes of farm diversification over time

an Australian perspective on an Eastern Norway model

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Abstract

Farm planning often focuses on optimal diversification with respect to risk, where the risk-management strategies combine production, marketing, financial and environmental aspects of the farm-firm. In this study an empirical examination of diversification has been carried out using a sample of farms in Eastern Norway. Four measures of diversification (indices) were defined to record the risks in relation to income from farm production. Using these alternative measures of diversification and panel-data, the results show that larger farms are more diversified, and for farms in more favourable locations and access to labour, the farmers have a greater incentive to spread risk. These results suggest that diversification and farm size are positively linked and that there may not be sufficient economies of scale to warrant specialisation and/or farm specialisation may not be environmentally desirable because of the pollution that would result. The Norwegian model offers good prospects for analysing similar issues of diversification in the Australian farming sector.
Original languageEnglish
Pages (from-to)1-9
Number of pages9
JournalAustralian Farm Business Management Journal
Volume3
Issue number1
Publication statusPublished - 2006

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Diversification
Farm
Norway
Risk management
Panel data
Farmers
Management strategy
Financial marketing
Labor
Incentives
Income
Environmental marketing
Warrants
Economies of scale
Planning
Pollution
Farm size
Farming

Cite this

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title = "Causes of farm diversification over time: an Australian perspective on an Eastern Norway model",
abstract = "Farm planning often focuses on optimal diversification with respect to risk, where the risk-management strategies combine production, marketing, financial and environmental aspects of the farm-firm. In this study an empirical examination of diversification has been carried out using a sample of farms in Eastern Norway. Four measures of diversification (indices) were defined to record the risks in relation to income from farm production. Using these alternative measures of diversification and panel-data, the results show that larger farms are more diversified, and for farms in more favourable locations and access to labour, the farmers have a greater incentive to spread risk. These results suggest that diversification and farm size are positively linked and that there may not be sufficient economies of scale to warrant specialisation and/or farm specialisation may not be environmentally desirable because of the pollution that would result. The Norwegian model offers good prospects for analysing similar issues of diversification in the Australian farming sector.",
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PY - 2006

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N2 - Farm planning often focuses on optimal diversification with respect to risk, where the risk-management strategies combine production, marketing, financial and environmental aspects of the farm-firm. In this study an empirical examination of diversification has been carried out using a sample of farms in Eastern Norway. Four measures of diversification (indices) were defined to record the risks in relation to income from farm production. Using these alternative measures of diversification and panel-data, the results show that larger farms are more diversified, and for farms in more favourable locations and access to labour, the farmers have a greater incentive to spread risk. These results suggest that diversification and farm size are positively linked and that there may not be sufficient economies of scale to warrant specialisation and/or farm specialisation may not be environmentally desirable because of the pollution that would result. The Norwegian model offers good prospects for analysing similar issues of diversification in the Australian farming sector.

AB - Farm planning often focuses on optimal diversification with respect to risk, where the risk-management strategies combine production, marketing, financial and environmental aspects of the farm-firm. In this study an empirical examination of diversification has been carried out using a sample of farms in Eastern Norway. Four measures of diversification (indices) were defined to record the risks in relation to income from farm production. Using these alternative measures of diversification and panel-data, the results show that larger farms are more diversified, and for farms in more favourable locations and access to labour, the farmers have a greater incentive to spread risk. These results suggest that diversification and farm size are positively linked and that there may not be sufficient economies of scale to warrant specialisation and/or farm specialisation may not be environmentally desirable because of the pollution that would result. The Norwegian model offers good prospects for analysing similar issues of diversification in the Australian farming sector.

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