Should One Trust a Farmer s Succession Plan? Empirical Evidence on the Intention-Behaviour Discrepancy from Finland

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1 Should One Trust a Farmer s Successon Plan? Emprcal Evdence on the Intenton-Behavour Dscrepancy from Fnland Mnna Väre, Chrstoph R. Wess and Kyöst Petola Mnna Väre, MTT Agrfood Research Fnland, Economc Research Luutnantnte 13, FIN Helsnk, Fnland Tel: , Fax: , E-mal: mnna.vare@mtt.f Chrstoph R. Wess, Department of Economcs, Venna Unversty of Economcs and Busness Admnstraton, Augasse 2-6, A-1090 Venna, Austra Tel: , Fax: , E-mal: cwess@wu-wen.ac.at Kyöst Petola, MTT Agrfood Research Fnland, Economc Research Luutnantnte 13, FIN Helsnk, Fnland Tel: , Fax: , E-mal: kyost.petola@mtt.f Paper prepared for presentaton at the XI th Congress of the EAAE (European Assocaton of Agrcultural Economsts), The Future of Rural Europe n the Global Agr-Food System Copenhagen, Denmark August 24-27, 2005 Copyrght 2005 by Mnna Väre, Chrstoph R. Wess and Kyöst Petola. All rghts reserved. Readers may make verbatm copes of ths document for noncommercal purposes by any means, provded that ths copyrght notce appears on all such copes.

2 SHOULD ONE TRUST A FARMER S SUCCESSION PLAN? EMPIRICAL EVIDENCE ON THE INTENTION-BEHAVIOUR DISCREPANCY FROM FINLAND Abstract Ths study examnes and compares farmers successon plans and actual successon behavour and fnds that the farm operator s age and regonal varables nfluence both. We also fnd a dscrepancy between ntenton and actual behavour whch s sgnfcantly related to the farm operator s age. Whereas the lkelhood of planned successon s overestmated sgnfcantly for younger farm operators, the opposte s observed once the farm operator s age exceeds 65 years. Therefore, stated plans have only a neglgble value n predctng the observed behavour and farm operator s statements on the tmng of successon may not provde enough nformaton on the grounds of desgnng structural polces n agrculture. Key words: famly farm, successon, ntenton-behavour dscrepancy, econometrc analyss, Fnland JEL classfcaton: D92, J26, Q12 1. Introducton The crcumstances of successon are of great mportance not only for the famly members drectly nvolved but also for the survval and success of famly farms n the long run, the appearance of rural areas, and the structure of the farm sector (Gale, 1993). Gven the mportance of (famly) successon for famly frm survval (e.g. Kmh, 1997), surprsngly lttle theoretcal and emprcal work has been devoted to ths ssue n agrcultural economcs. The exstng lterature s domnated by socal scentsts and anthropologsts (Khera, 1973; Errngton, 1993; Blanc and Perrer-Cornet, 1993). Only durng the last decade, agrcultural economsts have started to nvestgate famly successon more ntensvely (Kmh, 1994). Two dfferent emprcal approaches can be dstngushed n ths lterature. The frst group of studes analyses (actual) successon ex-post by nvestgatng panel data on farm households. Informaton on the farm operator s age n dfferent tme perods s used to dentfy farm successons. If the age of the farm operator between perod t and t + x ncreases by less than x years (or more than x years), one concludes that the person operatng the farm has changed. Ths approach has been used successfully n Kmh (1994) and Stglbauer and Wess (2000). 1 The second and more common approach s to nvestgate future successon plans of farm operators ex-ante on the bass of a farm survey. The respondents are asked about the probablty and tmng of famly successon and whether a farm successor s already determned. Examples of studes followng ths approach nclude Kmh and Lopez (1999), Kmh and Nachlel (2001), Glauben et al. (2004) and Mshra et al. (2004). Sharma et al., (2003) nvestgate successon n famly frms emprcally by collectng data on both, frms that had undergone successon from one famly member to another n the fve years pror to the survey as well as those, that antcpate such an event n the ensung fve years. Clearly, each of the two approaches has ts specfc advantages and dsadvantages. Farm surveys typcally provde more detaled nformaton on the motves of specfc behavour as the desgn of the survey and the questons to be asked can be partcularly focused on the ssue to be analysed. Smlarly, surveys typcally allow choosng the group of ndvduals to be surveyed drectly and to control 2

3 the mpact of exogenous factors. On the other hand, authors from dfferent felds of economcs (and, n partcular, from economc psychology and marketng) have challenged the usefulness of ntenton measures (such as successon plans) as a predctor for actual behavour. 2 Foxall (1983), for example, argues that a hgh ntenton-behavour correspondence should be expected only under strctly lmted (and unrealstc) condtons. 3 A dscrepancy between ntenton and actual behavour mght exst for a number of reasons. Frst, ndvdual preferences mght change over tme because both the economc envronment and the famly stuaton have changed (Ajzen, 1985). New nformaton becomes avalable, the fnancal stuaton of the farm changes, the potental successor receves an attractve job offer n the non-farm busness, and so forth. Secondly, the survey desgn, as well as the qualty of the responses, s often napproprate. In some of the surveys used, nformaton on successon plans s only a by-product of questonnares focusng on dfferent ssues. Furthermore, ndvduals certanly spend a lot of tme and effort n makng the rght successon decsons but may only devote lttle tme respondng to a survey. Ths pont s emphassed n the revealed preference lterature: people dsplay ther true preferences n what they do, not what they say. Indvduals mght also feel oblged to answer the queston about ntentons even though they have not yet made specfc plans (Bagozz and Y, 1989). Ill-formed ntentons are held wth low confdence, wll change quckly over tme and wll only have a weak mpact on behavour. Thrdly, actual successon decsons n famly frms nvolve actons of dfferent famly members (Kmh, 1997), whereas surveys typcally are addressed to one ndvdual only. Surveys often consder the farm operator's pont of vew wthout payng enough attenton to the chldren s opnon. The farm operator's plans, however, do not always materalse as the desgnated successor may decde to develop a career n the non-farm busness, for example. A fnal reason for an ntenton behavour dscrepancy s ntertemporal nconsstency n ndvduals preferences and behavour. Accordng to Horowtz (1992), ntertemporal consstency means that the actvty an ndvdual now plans to carry out n the future are the actvtes that the ndvdual actually carres out when the future arrves (p. 171). The phenomenon of ntertemporal consstency (or nconsstency) was ntroduced as a characterstc of the utlty functon by Strotz (1956) and, snce then, repeatedly arses n models of marketng and consumpton behavour and of monetary or fscal polcy. Emprcal evdence from expermental studes suggests that ndvduals do not act n a consstent way. Such dscrepances between ntenton and actual behavour are of concern to economsts for two reasons. Frst, f these dfferences appear n a non-systematc (random) fashon, the predctve valdty (relablty) of ntenton measures s reduced due to a random measurement error. Secondly, and maybe more mportantly, f the probablty of the farm operator's successon plans to come true are related to farm and famly characterstcs (such as farm sze, the farm operator s age, etc.), the results of econometrc studes based on farm surveys would be based. As the farm operator s age ncreases, new nformaton about hs health status emerges whch could motvate hm to revse hs orgnal plans. Smlar, the potental farm successor mght be less nterested n takng over smaller and less proftable farms, whch would suggest a systematc relatonshp between farm sze and the ntenton behavour dscrepancy. Furthermore, economc psychologsts frequently hypothesse that an ndvdual s dscount rate s not constant over tme but vares nversely wth the length of the tme to be wated. The relatve margnal prce of watng for rewards appears to declne as the tme necessary to wat ncreases. Ths would suggest farm operators successon plans to be systematcally based. 4 It s further suggested, that the rate of dscount mght vary nversely wth the sze of the reward for whch the ndvdual must wat (people gettng the bg decsons rght). Agan, ths would mply that the actons of ndvduals are not consstent over tme and successon plans and actual behavour are at varance. The goal of ths study s to nvestgate successon consderatons emprcally by focusng on both actual successon behavour and subjectve successon plans. We also compare ntentons and behavour, and nvestgate whether the dfference between them s systematcally related to farm and famly characterstcs. 5 If ths dscrepancy s large and non-random, then the value of farm successon 3

4 surveys for agrcultural polcy-makng s dmnshed. Secton 2 brefly descrbes the data and the estmaton method. Secton 3 reports the estmaton results and secton 4 concludes. 2. Data and Estmaton Method The farm data are taken from the Fnnsh Farm Accountancy Data Network (FADN). Ths network collects annually nformaton on fnancal characterstcs on roughly 900 farms. Accountancy data are supplemented by annual surveys on farm operator s (ex-ante) successon plans, whch are carred out on the FADN farms snce Among other thngs, the questonnare ncludes nformaton on farmers plans for the followng fve years. The queston posed here s: If you are not gong to contnue farmng on the farm by yourself, what s gong to happen? One of the nne response optons s: the farm wll be handed down wthn the farm famly. We defne a dummy varable for planned successon (PS), whch s set equal to 1 f ths opton s chosen by the respondent, and s zero otherwse. We also confront the atttudes and ntentons of ndvduals wth the record of ther subsequent behavour. Informaton on actual successon (AS) s obtaned ex-post by applyng an approach smlar to Kmh (1994) and Stglbauer and Wess (2000). If the age of the farm operator n two succeedng years ncreases by less (or more) than one year, we conclude that the person operatng the farm has changed. In ths case, we set the dummy varable AS equal to 1. A balanced panel of 348 farms s avalable for the perod of The farm data nclude detaled nformaton on the farm characterstcs and the fnancal stuaton of the farm. Snce the prmary objectve of the supplementng survey was not to study successon, lttle nformaton on varables that are consdered mportant for nvestgatng ths ssue econometrcally s avalable. In partcular, no nformaton on chldren and other famly members lvng on the farm s to hand. Furthermore, nformaton on the specfc motvaton of farm operators wth respect to successon s not accessble. The planned and actual successon behavour of the 348 farms s reported n Table 1. Table 1. Actual and planned successon behavour between 1996 and Actual Successon (AS) 0 1 Total Planned Successon (PS) Total Remarks: An χ 2 -test rejects the assumpton of ndependence of the two varables at the 99% level. Planned successon refers to the plans reported n 1996 for the perod 1996 to From the 348 farm households ntervewed n 1996, the majorty (290 or 83%) dd not plan to transfer the farm wthn the followng fve years. Ffty-eght respondents (17%) ndcated the ntenton to hand over the farm to a successor. As Table 1 suggests, not all of these successon plans dd actually materalse. Lookng at actual farm successon, we fnd that only a thrd of those farms that planned successon dd hand over the farm to a successor wthn the followng fve years (18 out of 58 farms). In the majorty of cases (40 farms) the planned successon dd not take place. We call ths a type twoerror of successon plannng. On the other hand, from those 290 farms plannng not to hand over the farm n the followng fve years, the majorty (279 farms or 96%) actually comply wth ths plan. Unplanned successon took place n 11 farms. These 11 cases are consdered type one errors of successon plannng. 4

5 The econometrc analyss of successon plans and actual successon behavour wll be carred out n two steps. Frst, we estmate probt models on the bnary varables AS and PS and compare results. Secondly, we defne a new varable measurng the ntenton behavour dscrepancy (DS) and test, whether the lkelhood of a dscrepancy to occur s related to specfc characterstcs of the farm and the farm household. DS 0 = 1 2 f f f PS PS PS AS AS AS = 0 = 1 = 1 (' type one error' ) (' type two error' ) The choce of exogenous varables s determned by earler lterature and data avalablty. 3. Results Frst, sngle equaton probt models were estmated separately for planned and actual successon. Parameter estmates are shown n Table 2. The estmated models are statstcally sgnfcant at the 1% level or better, as measured by the lkelhood rato test. Table 2. Parameter estmates of the sngle equaton probt models (t-values n parentheses). Planned Successon PS Actual Successon AS Explanatory varable Coeffcent t-value Coeffcent t-value Constant (-7.66) (1.16) Farmer s age (AGEF) (6.99) (-2.94) Farmer s age squared (AGEF 2 ) (3.75) Spouse s age (AGES) (0.04) (0.88) Arable land area (LAND) (-0.57) (1.16) Farm Income (INC) (0.86) (0.32) Lvestock and dary farm (LDF) (0.91) (1.83) North (NORTH) (-0.70) (2.16) Debt to Asset Rato (DAR) (0.85) (-0.33) Farm famly's 'workng hours (HOURS) (-0.91) (-1.07) Log-lkelhood Restrcted log-lkelhood Lkelhood rato test (DF) (8) (9) % Correct predctons % Correct predctons 1 (0) (96.20) (99.05) Remarks: DF refers to the degrees of freedom. 5

6 The estmated probt model on successon plans correctly classfes 84.2% of the cases. Whereas 96.2% of farms whch do not plan successon (PS = 0) are correctly predcted, the percentage of correctly classfed observatons where the farm operator plans to hand over the farm (PS = 1) s substantally lower wth 24.1%. The predctve power of the probt model on actual successons s somewhat hgher. The emprcal model correctly classfes 95.1% of all observaton, 99.1% of farms wth no successon (AS = 0) and 51.7% of farms wth successon (AS = 1) are correctly classfed. The results n Table 2 suggest that the farm operator s age (AGEF) s the most mportant explanatory varable n both models. The probablty of planned and actual successon wthn the followng fve years s sgnfcantly nfluenced by the age of the farm operator. As the farm operator s age ncreases, the probablty of actual successons ncreases exponentally. Whereas the probablty of successon for a hypothetcal farm operator 7 s small (below 0.1) at ages below 55, the probablty s close to 1 once the farm operator s age exceeds 70. Between 55 and 70, the successon probablty on average ncreases by 5.6 percentage ponts wth every addtonal year. The probablty of planned successon ncreases wth age as chldren become older and more sutable for successon and parents become more prepared to make successon decsons. We dd not fnd a negatve age-successon relatonshp at hgher ages as suggested by earler studes on successon for dfferent countres (e.g. Kmh and Bollman, 1999; Stglbauer and Wess, 2000; Kmh and Nachlael, 2001). The spouse s age (AGES) s not found to have a sgnfcant mpact on successon consderatons. We also observe that farms located n the northern parts of Fnland (NORTH = 1) report a sgnfcantly hgher probablty of handng over the farm, whch corresponds to earler fndngs of Petola et al. (2003). However, when lookng at planned farm transfers, no such dfference between northern and southern regons s observed. Farm characterstcs are expected to nfluence both, successon plans and actual behavour because they affect the value of the farm for the potental successor. Prevous studes found successon to be more lkely n larger farms (Gasson et al., 1988; Stglbauer and Wess, 2000; Kmh and Nachlel, 2001; Glauben et al., 2004; Hennessy, 2002). In contrast to our expectatons, hardly any of the farm and fnancal characterstcs were found to nfluence sgnfcantly actual or planned successon 8. Ths s partcularly surprsng, snce our data base has relatvely detaled nformaton on the fnancal stuaton of the farm. Farm ncome (FINC), debt and farm property 9, farm sze (measured n hectares under cultvaton (FIELD)) as well as varous dummy varables charactersng the producton structure of farms were all found to have no sgnfcant explanatory power. The only excepton beng the postve mpact of the dummy varable LDF for producton lne, whch s sgnfcantly dfferent from zero at the 10%-level n the probt model on actual successon. The probablty of actual successon s hgher n lvestock and dary farms (LDF = 1). Ths lack of explanatory power of fnancal varables mght be related to ther hgh varablty over tme. More approprate measures of the fnancal performance of farms could be obtaned by usng an average of farm ncome, for example, over a fve year perod pror to the perod of nvestgaton (1991 to 1996). Ths data unfortunately s not avalable here. Dfferences between planned and actual successons can be nvestgated n more detal by emprcally analysng the varable DS. Ths allows us to see whether the lkelhood of successon plans not to materalse s sgnfcantly related to specfc characterstcs of the farm and the farm famly. Table 3 reports results from a multnomal logt model estmated on DS. 6

7 Table 3. Results from the multnomal-logt model on the ntenton behavour dscrepancy. type-one error DS = 1 (AS > PS) type-two error DS = 2 (PS > AS) Explanatory varable Coeffcent t-value Coeffcent t-value Constant (0.51) (-2.58) Farmer s age (AGEF) (-1.86) (2.03) Farmer s age squared (AGEF 2 ) (2.55) (-1.57) Spouse s age (AGES) (-0.92) (-0.97) Arable land area (LAND) (0.21) (-1.16) Farm Income (INC) (-0.02) (0.44) Lvestock and dary farm (LDF) (0.54) (0.12) North (NORTH) (-0.27) (-2.02) Debt to Asset Rato (DAR) (-0.16) (1.03) Farm famly's 'workng hours (HOURS) (0.50) (-0.03) Log-lkelhood Restrcted log-lkelhood Lkelhood rato test (DF) (18) % Correct predctons 85.6 % Correct predctons 0, (1), [2] 98.6, (36.4), [2.5] Remarks: DF refers to the degrees of freedom. Outcome DS = 0 s the comparson group. The predctve power of ths model s low. Only one of those 40 farm households whch planned successon but then dd not hand over the farm was correctly classfed by the model. From the 11 households, where successon took place although t was not planned, only four are correctly classfed. Ths low predctve power most lkely has to do wth the fact that unplanned behavour s often caused by unexpected and accdental events, whch are unforeseen and neglected n the ndvdual farmer s decson makng and are even more dffcult to take nto account for an outsde observer. In any case, the man nterest of ths analyss s not the predctve power of the emprcal model. Rather, we are concerned wth the exstence of a sgnfcant relatonshp between the ntenton behavour dscrepancy (DS) and farm and famly characterstcs. Table 3 suggests that the ntenton-behavour dscrepancy s sgnfcantly related to the farm operator s age. On the bass of the parameter estmates reported, Fgure 1 llustrates ths relatonshp for a hypothetcal farm operator. 7

8 Probablty 1 0,9 0,8 0,7 0,6 0,5 0,4 0,3 0,2 0,1 0 Type-two error Pr(DS = 2) No dscrepancy Type-one error Pr(DS = 0) Pr(DS = 1) Farm operator's age Fgure 1. The ntenton-behavour dscrepancy over the farm operator s lfe cycle. Remarks: The probablty of a specfc event j (wth j = 0, 1, 2) s computed as J Pr( DS = j) = P = e (1 + e ) wth Z = β X, where X s the matrx of explanatory varables and β j s j j= 1 the vector of parameter estmates reported n Table 3. j j The type-two error frst ncreases wth the farm operator s age, reaches ts maxmum at age 59 and then decreases agan. For a hypothetcal farm operator aged 59, the calculated probablty of planned successon s about 20 percentage ponts larger than the calculated probablty of actual successon. 10 The extent of type-two errors decreases and type-one errors substantally gan mportance as the farm operator s age further ncreases. The older the farm operator gets, the more lkely an unplanned successon wll take place and successon plans reported n farm surveys wll sgnfcantly underestmate actual successon probabltes. A more detaled evaluaton of the reasons for ths dscrepancy s beyond the scope of ths paper. Horowtz s defnton of ntertemporal consstency wth respect to preferences (see secton 1) requres that exogenous shocks (changes n the economc envronment that could lead ndvduals to revse ther plans between now and n the future ) do not occur or are adequately controlled. Ths certanly s a problem n the current settng. In partcular, the farm survey does not provde detaled nformaton on the health status of the farm operator nor the employment opportuntes of the potental farm successor, etc. But even f ths nformaton were to have been collected n a survey, ts relablty as a predctor for future behavour could be called nto queston n the same way as the farm operator s successon plans. These varables mght change between the tme of the survey and the tme of the planned successon. From the results reported, t seems plausble that unforeseen events, that are mportant for actual successon decsons (such as health problems of the farm operator, for example), occur more frequently as the farm operator s age ncreases. Agan, the regonal dummy varable (NORTH) s sgnfcant n the second column. In the northern parts of Fnland, a type-two error s less lkely. If there s a successon plan, t wll be carred out. In the southern parts, the famly members nvolved n successon seem to change ther mnds more often. Whether ths effect s due to the stronger mpact of non-farm factors, that mght be more dffcult to predct for a farmer, remans an open queston though. Besdes the hgher opportunty cost of farmng, uncertanty over agrcultural ncome polcy programs mght be hgher n the South than n the North (Nem and Ahlstedt, 2004). The parameter estmates of all other explanatory varables ntroduced (fnancal characterstcs of farms) are not statstcally sgnfcant. 11 8

9 4. Conclusons Ths study nvestgates and compares farmers successon plans as well as ther actual successon behavour. The data set taken from the Fnnsh Farm Accountancy Data Network s supplemented wth results from annual farm surveys for 348 farms. A frst comparson of successon plans and actual behavour ndcates that farm operator s plans are realsed n 85% of the cases. In 11% of the observatons, planned successons dd not take place whereas 3% of the farm households report unplanned successons. The econometrc analyss ndcates that both, planned and actual successons are sgnfcantly related to the farm operator s age and to regonal varables. Further, we fnd that the ntentonbehavour dscrepancy s not purely accdental but s sgnfcantly related to the farm operator s age. Nether successon plans nor actual behavour s sgnfcantly nfluenced by the fnancal stuaton of the farm. For researchers amng at emprcally nvestgatng planned successon behavour, our results offer both, good news and bad news. The good news s that the above mentoned results do not suggest that the realsaton of farm operator s successon plans s sgnfcantly based by farm characterstcs. In fact, the data set analysed here does not support any relatonshp between farm fnancal characterstcs and successon behavour, ether planned or actual. The only varable beng a good predctor of successon s the farm operator s age. And ths s the bad news: for ths varable, we fnd that results from farm surveys on planned successon behavour seem to be unvaluable. Whereas the lkelhood of planned successon s overestmated sgnfcantly at younger ages, the opposte s observed once the farm operator s age exceeds 65 years. Unfortunately, the specfc reason for ths dscrepancy (new nformaton, tme nconsstent preferences, ) cannot be dentfed on the bass of the avalable nformaton and s open for further research. The present contrbuton suggests that the relatonshp between the farm operator s age and hs successon plans estmated on the bass of farm surveys may be msleadng. Therefore, stated plans have only a neglgble value n predctng the observed behavour. A farm operator s statements on the tmng of successon may not provde enough nformaton on the grounds of desgnng structural polces n agrculture. 9

10 Notes 1 Petola, Väre and Oude Lansnk (2003) follow a dfferent emprcal approach. Usng data from the Farmers Socal Insurance Insttuton has allowed them to study actual successon on the bass of more relable nformaton. 2 Mueller (1957), Tobn (1959) and Thel and Kosobud (1968) are early examples of emprcal studes on the relatonshp between plans and actual behavour. In agrcultural economcs too, there s some emprcal evdence that the dfference between planned and realsed nvestments can be large (Honkanen, 1983; Kuhmonen, 1995). Focusng on farm successon, Glauben et al. (2002) suggest an nconsstency n farm operator s successon plans over tme. However, ther results are based on cross-sectonal data only and thus cannot account for actual behavour. 3 The author notes that there must be no mpedment to the voluntary performance of the acton and that the ndvdual s stuaton must reman stable from the tme of the measurement throughout the performance of the behavour. Ths ceters-parbus condton wll also be relevant n nterpretng the results from our emprcal analyss. 4 Thaler and Shefrn (1981) llustrate tme nconsstency wth a customer, who plans to go on det on January 1, but when January 1 arrves, postpones the begnnng of the det. It s often suggested that the dfference between today and tomorrow wll seem greater than the dfference between a year from now and a year plus one day. 5 It s not the ntenton of ths study to emprcally test the dfferent explanatons for an ntenton behavour dscrepancy (should one exst) based on famly s commtment or desres lke e.g. n Sharma et al., (2003). Ths would go far beyond the scope of ths paper and could not be done wthout addtonal expermental evdence. 6 The FADN data nclude 511 farms on whch survey data on farm successon s avalable both n 1996 and n Of these farms, 366 contnued farm proftablty accountancy to the year 2001 whereas 145 dsappeared from the data set between 1998 and Those 145 farms do not dffer substantally from those remanng n the farm proftablty accountancy over the whole study perod (see Appendx 1). Unfortunately, we do not have more specfc nformaton on the reasons for farms ext from the FADN. We further elmnated 18 observatons where the farm operator reports plans to sell or rent out the farm to a non-famly member, reforest the felds or has some other plans for the followng fve years. 7 A hypothetcal farm (operator) s charactersed by takng mean and mode values for all explanatory varables. 8 The endogenous varables farm ncome (INC), debt to asset rato (DAR) and farm famly s workng hours (HOURS) were ncluded n the analyss under the H 0 hypothess but were not found to be statstcally sgnfcant accordng to the t-test and do not thus cause any problem. 9 Table 2 reports results for the debt to equty rato (DAR) but we also ncluded varables separately. 10 Ths calculaton s based upon the parameter estmates reported n Table Changes n farm characterstcs between 1996 and 2001 also dd not contrbute sgnfcantly to the explanatory power of the model. Acknowledgements: The authors thank Doctor Ayal Kmh for helpful comments on an earler draft. Fnancal support from the Austran Scence Fund (SFB F 020), Mnstry of Agrculture and Forestry of Fnland, the Farmers Socal Insurance Insttuton, Fnland and the Fnnsh Assocaton of Academc Agronomsts are gratefully acknowledged. 10

11 References Ajzen, I. (1985). From Intentons to Actons: A Theory of Planned Behavour. In: Kuhl, J. and Beckmann, J. (eds.), Acton Control. From Cognton to Behavour, Berln Hedelberg: Sprnger- Verlag, pp Bagozz, R. P. and Y, Y. (1989). The Degree of ntenton Formaton as a Moderator of the Atttude- Behavour Relatonshp. Socal Psychology Quarterly 52(4): Blanc, M. and Perrer-Cornet, P. (1993). Farm transfer and farm entry n the European Communty. Socologa Rurals 33: Errngton, A. (1993). Managng Successon n the Farm Famly Busness. Farm Management 8: Foxall, G. R. (1983). Consumer Choce. New York: St. Martns Press. Gale, F. H. (1993). Why Dd the Number of Young Farm Entrants Declne? Amercan Journal of Agrcultural Economcs 75: Gasson, R., Crow, G., Errngton, A., Hutson, J., Marsden, T. and Wnter, D. M. (1988). The Farm as Famly Busness: A Revew. Journal of Agrcultural Economcs 39: Glauben, T., Tetje, H. and Wess, C.R. (2004). Intergeneratonal Successon n Farm Households: Evdence from Upper Austra. Revew of Economcs of the Household 2: Hennessy, T. (2002). Modellng Successon on Irsh Dary Farms. Paper presented at the 10 th EAAE Congress n Zaragoza, Span: CD-rom. Horowtz, J. K. (1992). A test of ntertemporal consstency. Journal of Economc Behavor & Organzaton 17: Honkanen, S. (1983). Maatalouden nvestonnt, pääomakanta ja PTT:n nvestonttedustelu. Pellervo Economc Research Insttute, Reports 34, Helsnk: PTT. Khera, S. (1973). Socal Stratfcaton and Land Inhertance among Austran Peasants. Amercan Anthropologst LXXV: Kmh, A. (1994). Optmal Tmng of Farm Transferral From Parent to Chld. Amercan Journal of Agrcultural Economcs 76: Kmh, A. (1997). Intergeneratonal Successon n Small Famly Busnesses: Borrowng Constrants and Optmal Tmng of Successon. Small Busness Economcs 9: Kmh, A. and Bollman, R. (1999). Famly farm dynamcs n Canada and Israel: The Case of Farm Exts. Agrcultural Economcs 22: Kmh, A. and Lopez, R. (1999). A Note on Farmers Retrement and Successon Consderatons: Evdence from a Household Survey. Journal of Agrcultural Economcs 50: Kmh, A. and Nachlel, N. (2001). Intergeneratonal Successon on Israel Famly Farms. Journal of Agrcultural Economcs 52: Kuhmonen, T. (1995). Suomen maatlojen sopeutumnen EU-jäsenyyteen arvo vuonna Suomen aluetutkmus FAR, Selvtyksä 8. Sonkajärv: FAR. Mshra, A. K., El-Osta, H. and Johnson, J. D. (2004). Successon n Famly Farm Busness: Emprcal Evdence from the U.S. Farm Sector. Paper presented at the AAEA Meetng n Denver, Mueller, E. (1957). Effects of Consumer Atttudes on Purchases. The Amercan Economc Revew 47 (6): Nem, J. and Ahlstedt, J. (eds.) (2004). Fnnsh Agrculture and Rural Industres Agrfood Research Fnland, Economc Research. Publcatons 104a. Helsnk. 11

12 Petola, K., Väre, M. and Oude Lansnk, A. (2003). Tmng and type of ext from farmng: farmers early retrement programmes n Fnland. European Revew of Agrcultural Economcs 30: Sharma, P., Chrsman, J. J. and Chua, J. H. (2003). Successon Plannng as Planned Behavor: Some Emprcal Results. Famly Busness Revew 16(1): Stglbauer, A. M. and Wess, C. R. (2000). Famly and Non-Famly Successon n the Upper-Austran Farm Sector. Cahers d Économe et Socologe Rurales 54: Strotz, R. H. (1956). Myopa and Inconsstency n Dynamc Utlty Maxmzaton. Revew of Economc Studes 23(3): Thaler, R. H. and Shefrn, H. M. (1981). An Economc Theory of Self-Control. Journal of Poltcal Economy 89(2): Thel, H. and Kosobud, R. (1968). How Informatve are Consumer Buyng Intenton Surveys? Revew of Economcs and Statstcs 50: Tobn, J. (1959). On the Predctve Value of Consumer Intentons and Atttudes. Revew of Economcs and Statstcs 41:

13 Appendx 1. Descrptve statstcs of farms contnung farm accountancy system as well as extng farms. Farms used for econometrc analyss (number of farms s 348) Mean Std.Dev. Mn. Max. Farmer s age Spouse s age Arable land, ha Forest, ha Share of lvestock and dary farms (%) Share of farms located n the North (%) Total assets, 10, Farm depts., 10, Farm famly's workng hours, 100 h Farm Income, 10, Contnued n the FADN (number of farms s 366) Mean Std.Dev. Mn. Max. Farmer s age Spouse s age Arable land, ha Forest, ha Share of lvestock and dary farms (%) Share of farms located n the North (%) Total assets, 10, Farm depts., 10, Farm famly's workng hours, 100 h Farm Income, 10, Exted from the FADN (number of farms s 145) Mean Std.Dev. Mn. Max. Farmer s age Spouse s age Arable land, ha Forest, ha Share of lvestock and dary farms (%) Share of farms located n the North (%) Total assets, 10, Farm depts, 10, Farm famly's workng hours, 100 h Farm Income, 10,