Product diversification, production systems, and economic performance in U.S. agricultural production

The U.S. agricultural sector is experiencing significant structural change. Farm size is rising and activities are broadening, including more off-farm employment, implying economic incentives for larger and more diversified farms, and complementarities among agricultural netputs. We quantify such patterns for farms in the corn belt, by measuring scale economies, and output and input contributions and jointness. We estimate the multi-output and -input production technology by stochastic frontier techniques applied to output and input distance functions. We find that both scope and scale economies have important economic performance implications, and that an input-oriented framework including off-farm income best characterizes agricultural production.