What Did They Do With the Money? An Analysis of Tobacco Buyout Recipients' Expenditure Choices

Abstract

There are many expenditure options available to farmers who received a tobacco buyout check. We used a multinomial probit model to analyze how farmer, business, and household characteristics influenced the choice of expenditure option. We found that farmers tend to use the tobacco buyout payments as a special income account that they spend in a focused manner, and that their expenditure choices vary by gender and by age groups. We also found that farmers who plan to stay in tobacco production are more likely to invest in new or existing on farm activities.

Keywords: defensive avoidance, expenditure choices, mental accounting, multinomial probit, tobacco buyout

JEL Classification: D01, O01, R00