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Hanging On Too Long?

Hanging On Too Long?

SDSU economists to study factor driving managerial decisions to pass their operations to next generation.

Statistics tell a grim story about how difficult it is for one generation of farmers to pass the farm to a new generation, according to two SDSU researchers who are studying the farm transitions.

From 2002 to 2007, the number of operators nationwide aged 75 years and older increased by 20%, but the number of operators under 25 years of age decreased 30%.

South Dakota State University researchers Kuo-Liang "Matt" Chang and Soo Hyun Cho say those USDA figures demonstrate why it is important to understand the factors driving management decisions — including the crucial decision to pass the farm operation to a younger generation.

Chang and Cho will study the issue this year with the help of a $20,000 grant from the Harms Fund for Excellence in Management, one of several donor-funded programs in economics and management.

"The continuous loss of younger population to urban areas has made farmers' managerial decisions and inter-generational transitions extremely difficult. The struggle to maintain daily farm operations with limited labor during the busy seasons considerably challenges the survival of the farm business," Chang says. "We believe farm survival and farm family-to-work management are timely and urgent issues that deserve more attention both from academia and from politicians."

Economists often study decisions to exit farming by using over-simplified economic theories and tend to forget the important human-side of the decision-making process, Chang says. For example, efficiency theory that suggests the decrease of farm population is an inevitable result of technology advancement and falling farm income. But Chang believes that theory is too simple, failing to consider the deep attachment farmers feel for land. Chang says that farm numbers would have declined even more than they have from the 1950s to the present if efficiency theory adequately explained the trend.

Similarly, Chang and Cho content  the exit barrier theory — the idea that it costs too much to quit — isn't an adequate explanation for why some farm operations keep operating despite very low profits or even losses.

Chang and Cho say they want to explore a life-cycle theory, which applies to all types of career change. They want to look at how that theory is applied in the larger context of farm families. Chang and Cho will conduct a two-year, multidisciplinary study regarding farmers' managerial decisions-making processes, the family-to-work labor/time arrangement and inter-generation migration patterns.

Source: SDSU

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