Farmer's exit decisions and early retirement programs in Finland

K. Pietola, M. Vare, A.G.J.M. Oude Lansink

    Research output: Chapter in Book/Report/Conference proceedingConference paperAcademic


    This paper estimates farmer decisions between three discrete occupational choices: exit and close down the farming operation (1), exit and transfer the farm to a new entrant (2), or continue farming and retain the option to exit later on (3). The farmer optimisation problem is formulated as a recursive optimal stopping problem. The unknown parameters are first estimated by a switching-type, reduced form Probit models and, then by the Simulated maximum likelihood (SML) method, controlling for serial correlation in the errors. Serial correlation in the errors is controlled for by the Geweke-Hajivassiliou-Keane (GHK) simulation technique. The results suggest that the timing and the type of farmer exit decisions respond elastically to farmer characteristics, farm characteristics, and economic environment. Early retirement programs and the level of farmer retirement benefits are predicted to play a key role in steering structural development and enhancing family farms in the Nordic agricultural sectors.
    Original languageEnglish
    Title of host publication10th Congress European Association of Agricultural Economists (EAA) : Exploring diversity in the European Agri-Food System, Zaragoza, Spain, 28-31 August 2002
    Publication statusPublished - 2002
    Event10th Congress European association of agricultural economists - Zaragoza
    Duration: 28 Aug 200231 Aug 2002


    Conference10th Congress European association of agricultural economists


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