Family Structure,Policy Shocks,and Family Business Adjustment Choices

This research used survey data collected between 2005 and 2006 in rural Kentucky to empirically investigate how different types of rural households in Kentucky cope with the changes in economic environment during the post-tobacco buyout by employing two different family business models, the Agricultural Household Model and the Sustainable Family Business Model. Data were analyzed using a multinomial probit model. The results indicate that multi-generational households were more likely to invest in low risk investments and less likely to employ a family member off-farm than couples with young children. Therefore, family structure plays an important part in the types of adjustment strategies chosen by farm families. The results also indicate that the Sustainable Family Business Model is a better predictor of the observed correlation between family structure and family farms’ choices of adaptation strategies.