Importance of the Farm Sector to the Economy: A Multiplier Approach

A mathematical model is presented, which uses a multiplier approach to determine the relation of farm income to total income in a community, state, or region. Application of the model to Kansas data for the years 1950 to 1966 showed (a) that, on the average, $1.00 of farm income generated $3.33 of total income, whereas $1.00 of nonfarm income generated only $1.46 of total income, (b) that the farm sector expended 88.4 percent of its income in the nonfarm sector, whereas the nonfarm sector expended only 10 percent of its income in the farm sector, and (c) that there was an increasing interdependence between the farm and nonfarm sectors from 1950 to 1966