A temporal comparison of sources of variability in farm household income

Based on two time periods (1995 and 1999), this study examines how much of the variability in total farm household income can be attributed to the variability in net farm income and in off‐farm income sources (such as income from off‐farm businesses, wages and salaries, interest and dividends, and other off‐farm income). Comparisons are also made between participants and nonparticipants in federal commodity programs. Using a normalized variance decomposition approach and data from the Agricultural Resource Management Study (ARMS), variability in the total income of participating households is shown to originate primarily from farming. This is particularly true for large or super‐large farms, and for farms not located in the Northeast. The major source of income variability for nonparticipating households is income from off‐farm sources, especially for cash grain or “other livestock” producers, farms in the small or mid‐size range, and farms located in the South.