Income Diversification of Farm Households in Schleswig-Holstein

Abstract

This article investigates the degree of income diversification and identifies its determinants in a selected German Land, Schleswig-Holstein. We apply the concept of Gollop and Monahan to measure the farm’s specific diversification. To analyze the relationships between income diversification and other farm’s and household’s specific factors, an econometric model has been estimated based on a comprehensive survey data. The results show that the main economic incentive for a farm’s diversification is the expected income increase, whereas risk minimization is less important. The access to resources (labor, capital) is an important requirement for tapping alternative economic activities. The formal agricultural education of the farmer is a significant factor: The higher his education the stronger is the tendency towards diversification. These findings are relevant for the design of agricultural policy measures which aim at explicitly meeting the heterogeneous needs of rural households.