Are farmers’ decisions to work off the farm related to their decisions to participate in the conservation reserve program?

Since both working off the farm and participating in the Conservation Reserve Program (CRP) remove important resources from US agricultural production, we utilize two econometric specifications to test hypotheses regarding whether these two decisions by farmers are independent. We find statistical evidence that decisions to participate in CRP and work off the farm are correlated. Characteristics of farm households and farm operations affect both decisions directly and indirectly, as do local economic conditions and participation in other farm programs. To illustrate their importance, we simulate the combined direct and indirect effects of changes in decoupled payments and farm size on the probabilities of farm households engaging in these two activities. We also illustrate that the probability of engaging in these two activities depends on whether the farm is located in a state, or local agricultural district or participates in a related farmland retention program.