Endogenous norms and preferences and the farm income problem

A two-sector model with non-overlapping generations is presented, where rural occupational mobility is hampered by endogenous norms and preferences. The occupational choice of farm youths may be influenced by an inherited belief in the farming way of life and a related social norm that sanctions mobility. This results in a bias towards farming occupations which, via preference formation, tends to promote the norm across generations. The model is used to explain various stylised facts of the farm problem, such as low farm incomes, small holdings and crowding on the land. By showing how these phenomena are mitigated by individualisation and increased integration of farmers into non-farming societies, an explanation is offered as to why the farm income problem has diminishe