Explaining Changes in the Distribution of Annual Dairy Farm Income over Time Hung-Hao Chang, Richard N. Boisvert, and Loren W. Tauer* Selected paper prepared for presentation at the American Agricultural Economics Association Annual Meeting, Orlando, Florida, July 28-29, 2008 Abstract This paper identifies factors affecting the distribution of farm income among dairy producers over time. Using data from participants in Cornell’s Dairy Farm Record Program, we decompose differences of farm income distributions into those due to: differences in means of observable farm characteristics, differential marginal effects of characteristics and unobserved random error. The distribution of farm income is affected by factors reflecting the operators’ experience and investment in human capital and indicators of management efficiency and level of capital investment. The marked changes in marginal contributions of these factors explain most of the total change in the distribution of income. Key words: Dairy farm income distribution, decomposition. ________________ *The authors are, respectively, Assistant Professor, Department of Agricultural Economics, National Taiwan University; Professor, Department of Applied Economics and Management, Cornell University; and Professor, Department of Applied Economics and Management, Cornell University. The research on which this bulletin is based is funded by Cornell University Hatch Project 121-7419, Integrated Risk Management Decision Strategies for Dairy Farmers. Copyright 2008 by Hung-Hao Chang, Richard N. Boisvert, and Loren W. Tauer. All rights reserved. Readers may make verbatim copies of this document for non-commercial purposes by any means, provided that this copyright notice appears on all such copies.