OPTIMAL TIMING OF FARM TRANSFERAL FROM PARENT TO CHILD

When farm income is first increasing and then decreasing in the operator's age, the timing of farm transferal from parent to child is optimally determined by families who seek to maximize joint income or utility. Using a sample of Israeli farms in which the operation of the farm changed from parent to child between 1971 and 1981, equations of transfer time and child's education are derived. A simultaneous equation, censored regression model is estimated using a two-stage method. Results support the theoretical predictions that transfer time is decreasing with parent's age and with child's schooling, and increasing with parent's experience.