The socioeconomic basis of farm enterprise diversification decisions

In contrast to earlier studies, recent research on socioeconomic and ecological factors affecting farm decision making suggests that, at the microlevel, farm size is inversely related to specialization and directly related to diversification decisions but empirical tests have been limited. Using a social behavioral, farming systems perspective, we examine factors affecting diversification and specialization decisions, including land tenure, off-farm work, and education (which are crucial to successful management) and environmental variation (which affects the decision to select appropriate enterprises). Data from a random sample of Kentucky farmers were used to test the model. Diversification, whether defined according to crops or commodities, is significantly related to farm size, human capital, and regional variation in land and soil types. The study clarifies the relationship between diversification and farm size issues and broadens understanding of farm diversification decisions. The findings indicate that increased farm size and better farm management reduce the rate of increase in farm specialization