Allocating Farm Resources between Farm and Nonfarm Uses

The purpose of this paper is to provide a theoretical foundation for explaining the rationality of allocating traditional "farm resources" to nonfarm employment. This is a first step towards including nonfarm employment of farm resources in micro and macro models of structural adjustment and production response to changes in economic stimuli. The theoretical model is developed around the use of operator's labor at the farm level. It demonstrates the conditions under which farm operators can combine farm and nonfarm employment to maximize income and explains, in a familiar theoretical context, the attractiveness of part-time farming as a permanent or as a transitory organization of resource use.