The dynamics of structural change and the incomes in West-German agriculture

This study analyses the effects of sunk costs of assets and human capita on farmers' income in West Germany. Some of the simulation experiments presented confirm the thesis that factor immobilities like sunk costs cause farmers not to immediatly react to increasing non-farm incomes and to leave the agricultural sector. Adjustments with a larger impact on agricultural production mainly take place when farms have to reinvest in assets or in vocational training. Furthermore, sunk costs and a small farm structure together cause the rents for land to be higher than average land productivity. As a result, both, factor immobilities and excessive land rents, are responsible for the existing income disparities.