The effect of education on farm profit and productivity in Canada

This research was undertaken to address the problem of scarce and conflicting evidence concerning the effect of education on farm profit and productivity in Canada. The goals of this thesis were two-fold: to measure the returns accruing to Canadian farm-operators who have generated human capital through the schooling process; and second, to consider the implications of such measurements. A model reflecting the role of education in the decision-making process of Canadian farm-operators was developed. Both the production function approach and the profit function approach were discussed. The variable profit function approach was found to be the most appropriate model for representing the role of schooling in the decision-making process of the Canadian farm-operator. An extension of the variable profit function model was also presented, wherein operator on-farm labour supply and aggregated physical capital were endogenized in a simultaneous equations framework. The main source of data used in the thesis was the Agriculture-Population Linkage data base compiled from information gathered in the 1971 Census and the 1981 Census. The schooling coefficient generally increased as adjustments were made in the model so that more channels of decision-making were open to the farm-operator. These adjustments included the addition of an agricultural research variable, the aggregation of capital into one variable and the movement from a gross sales production function to a variable profit function. Based on estimations of a variable profit function, the marginal profit effect of an additional year of schooling for a Canadian farm-operator was computed to be $1003 (1970 $) using data from the 1971 Census and $3161 (1980 $) using data from the 1981 Census. Estimations of the variable profit function with instrumental variables were found to be successful in describing the role of schooling in the farm-operator's decision-making process. It was concluded that the net returns to schooling in Canadian agriculture are highly positive.Land and Food Systems, Faculty ofGraduat