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Abstract
We formulate a method to determine an equitable division of dairy farm partnership income
when partners provide unequal amounts of capital, labor, and management and empirically
estimate this relationship. New York dairy farm financial data are used within fixed effects and
random coefficient panel regression models to reveal a systematic division of dairy farm
partnership income among operators’ labor, capital, and management while controlling for
heterogeneity arising from differing herd size. Results indicate that controlling for time and
heterogeneity across farms due to herd size are important factors when dividing net farm income
among unpaid factors of production. Empirical estimates of allocating dairy farm partnership
income to equity, operators’ labor, and management are presented.