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Family Firms and Policy
H. Pushkarskaya
Department of Agricultural Economics
Non-Technical Summary
Tobacco buyout program caused a structural change in economy of Kentucky This project examines the effect of Tobacco Buyout on i) family businesses ii) and the consequent, indirect effects on communities.
Project Description
Data related to Kentucky rural residents economic and household characteristics were collected and analyzed in order to assess the effect of a "man-made disaster" - elimination of tobacco quota, tobacco price control, and consequent tobacco buyout program - on Kentucky tobacco farmers and Kentucky rural communities. The dataset that contains responses of 702 participants on more than 60 questions was shared with researchers from Cornell University, Max Plank Institute for Entrepreneurship, Memorial University, Canada, and Texas A&M University, as well as prepared to be published online.
Impact
The analyses of the data led to a number of new theoretical and applied findings. Among the most interesting are the following: Tobacco farmers were expected to transition to other business activities. However, farmers decide individually how they spend their tobacco quota, and their expenditure decision is influenced by their age, education, on and off farm income, and overall lifestyle. Therefore, the composition of the farm population has a significant impact on the outcomes of the tobacco buy-out program on rural communities.
It was also found that while discounted utility theory gives acceptable predictions of the farmers' choice between a lump sum payment and annuities, other factors have to be taken into consideration.
- First, there are consistent biases that describe individual intertemporal behavior, such as availability bias or acquiescence bias.
- Second, there is a certain degree of heterogeneity in individual intertemporal preferences that correlates with their personal characteristics, such as education and production status.
- Third, the analysis revealed that the decision to exit the tobacco market positively correlated with the decision to take a lump-sum payment.
The analysis also illustrated that the family structure and internal family events, such as death of a household member or divorce, strongly influence the decision to start a new business, and that these effects vary by gender.
The data also suggest that the decision to exit tobacco farming is largely influenced by the farmer's life cycle. Availability of off-farm employment has the strongest effect on farmers younger than 46, while the effect of variables measuring efficiency and exit barriers appears to be more uniform across age groups.
The analysis also revealed that in the domain of operational and competitive environmental uncertainties, self-efficacy beliefs are significantly higher among nascent entrepreneurs than among non-entrepreneurs. This result is robust across various demographic groups. It was found that self-efficacy in the domain of financial uncertainties inversely relates to the probability of starting a new business among married females. The results suggest that self-efficacy constructs related to environmental uncertainties should be incorporated into the more complex models of research, education, and community intervention while taking into account other significant factors such as various "push" motives of entrepreneurship.
Finally, it was shown that internet adoption in rural areas changes demographics of rural entrepreneurs. They become more educated, with a higher income. For the low income uneducated group entrepreneurship becomes a less available employment option. Internet also decreases gender imbalance among entrepreneurs. These results suggest that policy makers need to design targeted support policies for low income individuals.
Publications
Marshall Maria, and Helen Pushkarskaya. 2009. "An analysis of tobacco farmers' buyout expenditure choices." Forthcoming in Journal of Agribusiness.
Pushkarskaya, Helen, and Maria Marshall. 2008. "Lump Sum versus Annuity: Choices of Kentucky Farmers During the Tobacco Buyout Program." Journal of Agricultural and Applied Economics, under the second review.
Pushkarskaya, Helen and Ellen Usher. 2008. "Self-Efficacy for Resolving Environmental Uncertainties Distinguishes Nascent Entrepreneurs from Non Entrepreneurs in Rural Areas." Under the review in the Journal of Extension.
Pushkarskaya, Helen and Dmitry Vedenov. 2008. "Farming Exit Decision by Age Group: Analysis of Tobacco Buyout Impact in Kentucky." Journal of Agricultural and Applied Economics, under the second review.
Pushkarskaya, Helen and Dmitry Vedenov. 2008. "Effect of Internet adoption on the demographic profile of Nascent Entrepreneurs in Rural Kentucky." Under the review in Entrepreneurship and Regional Development, An International Journal.
Pushkarskaya, Helen. 2008. "Gender Differences in Determinants of Entrepreneurial Intentions in a Rural Setting". Innovative Marketing, 1 pp.103-113.