Determinants of Farm Household Income and Inequality: On the Effects of Old Farmer Pension Program
Date Issued
2015
Date
2015
Author(s)
wei, Min-Fang
Abstract
Based on a quantitative assessment, this paper investigates the determinants of farm household income and inequality, with an emphasis on the effect of Old Farmer Pension Program. Drawn from the data of the Survey of Family Income and Expenditure in Taiwan Area of Republic of China from 1999 to 2013, we apply the regression-based inequality decomposition approach proposed by Fields (2003). The advantage of Fields’ decomposition is the measured percentage effect of each explanatory variable is independent of the chosen measure of inequality index. The results indicate that farm household income remained stable during the past 15 years, whereas farm household income inequality declined smoothly. Family size and the percentage of high-education working members in the farm household are the two main determinants of household income inequality. The former equalizes household income inequality while the latter is an enlarging determinant. In order to explain why the inequalities exist between different types of farm household, this study goes one step further to decompose the income differential between two groups of farm household using Oaxaca-Blinder decomposition. The endowment effect of family size is found to play an important role leading to income differences between two groups of farm household. The results in this study also indicate that the share attributed to receiving pension have risen since 1999. Although the increase in pension is found to equalize farm household inequality, it does not exhibit the gap-bridging effect between those receiving and not, which suggests there are some other socioeconomic factors resulting in income differences between different subgroups. To improve the economic conditions of farm households and bridge income inequality, it is suggested that the government needs toundertake some radical actions to upgrade the quality of the workforce of farm household, and to pursue a structural reform of the production and marketing systems in the agricultural sector.
Subjects
Farm household
Income inequality
Old Farmer Pension Program
Income determinants
Regression-based decomposition
Family size
Gini coefficient
Varianceof natural logarithm
SDGs
Type
thesis
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