Väre Minna | Akateeminen Kirjakauppa

In the past decade, the Finnish agricultural sector has undergone rapid structural changes. The number of farms has decreased and the average farm size has increased; the number of farms transferred to new entrants has decreased as well. Part of the structural change in agriculture is manifested in early retirement programmes. In studying farmers’ exit behaviour in different countries, institutional differences, incentive programmes and constraints are found to matter. In Finland, farmers’ early retirement programmes were first introduced in 1974 and, during the last ten years, they have been carried out within the European Union framework for these programmes. The early retirement benefits are farmer specific and depend on the level of pension insurance the farmer has paid over his active farming years. In order to predict the future development of the agricultural sector, farmers have been frequently asked about their future plans and their plans for succession. However, the plans the farmers made for succession have been found to be time inconsistent. This study estimates the value of farmers’ stated succession plans in predicting revealed succession decisions. A stated succession plan exists when a farmer answers in a survey questionnaire that the farm is going to be transferred to a new entrant within a five-year period. The succession is revealed when the farm is transferred to a successor. Stated and revealed behaviour was estimated as a recursive Binomial Probit Model, which accounts for the censoring of the decision variables and controls for a potential correlation between the two equations. The results suggest that the succession plans, as stated by elderly farmers in the questionnaires, do not provide information that is significant and valuable in predicting true, completed successions. Therefore, farmer exit should be analysed based on observed behaviour rather than on stated plans and intentions. As farm retirement plays a crucial role in determining the characteristics of structural change in agriculture, it is important to establish the factors which determine an exit from farming among elderly farmers and how off-farm income and income losses affect their exit choices. In this study, the observed choice of pension scheme by elderly farmers was analysed by a bivariate probit model. Despite some variations in significance and the effects of each factor, the ages of the farmer and spouse, the age and number of potential successors, farm size, income loss when retiring and the location of the farm together with the production line were found to be the most important determinants of early retirement and the transfer or closure of farms. Recently, the labour status of the spouse has been found to contribute significantly to individual retirement decisions. In this study, the effect of spousal retirement and economic incentives related to the timing of a farming couple’s early retirement decision were analysed with a duration model. The results suggest that an expected pension in particular advances farm transfers. It was found that on farms operated by a couple, both early retirement and farm succession took place more often than on farms operated by a single person. However, the existence of a spouse delayed the timing of early retirement. Farming couples were found to co-ordinate their early retirement decisions when they both exit through agricultural retirement programmes, but such a co-ordination did not exist when one of the spouses retired under other pension schemes. Besides changes in the agricultural structure, the share and amount of off-farm income of a farm family’s total income has also increased. In the study, the effect of off-farm income on farmers’ retirement decisions, in addition to other financial factors, was analysed. The unknown parameters were first estimated by a switching-type multivariate probit model and then by the simulated maximum likelihood (SML) method, controlling for farmer specific fixed effects and serial correlation of the errors. The results suggest that elderly farmers’ off-farm income is a significant determinant in a farmer’s choice to exit and close down the farm. However, off-farm income only has a short term effect on structural changes in agriculture since it does not significantly contribute to the timing of farm successions.