Income supported farming: The economic behaviour of farmer households

Income supported farming means that the farmer household covers low returns from their farming with other sources of income. This is in particular relevant for part-time farmers. This group grow in numbers relative to full-time farmers all over Europe. The decisions of income supporting farmers need a richer theoretical framework to be understood, than the standard one based on profit maximization. We will explore the larger class of models based on utility maximization of joint household and farm produ ction in the presence of eventual transaction and adjustment costs. Such models are consistent with the popular view that farmers farm as they can afford, they have a theoretical foundation, and they contain the standard behavioral models of producers and consumers as special cases. Within this frame it seems possible to model and analyze the farmers' simultaneous decisions with respect to land use intensity, farm size, farm investments, and combinations with off-farm activities. Farmers are of course h eterogenous in these respects, but that will be accounted for. In turn, one can then see the impacts of agricultural policy in relation to the state of the general economy with respect to these matters. That is a step in the development of knowledge to su pport sustainable policy with respect to land use and land-using industries - one of the goals of the research programme. The key tool in this research will be structural microeconomic models estimated on a panel of farm household accounts from Denmark, Finland and Norway. By combining countries with different policy regimes, the analysis will get wider empirical support. From estimation results one can both state key findings for representative households, and build dynamic aggregate policy models base d on their structure.