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Loan survival: Are Black farmers more likely to default?

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  • Marie‐Cécile Vekemans
  • Gianna Short
  • Charles B. Dodson
  • Bruce L. Ahrendsen

Abstract

This paper discusses differences in the likelihood of loan default between Black and other farmers who took out USDA direct operating loans from 2011 to 2020. By controlling for financial, demographic, and other factors using a Cox proportional hazards model, we found that Black farmers have a higher incidence of default than other farmers. We advanced the research on the relative loan performance of different racial/ethnic minority groups, revealing heterogeneity in the likelihood of default that indicates using a single grouping for all minorities obscures important differences. There could be multiple contributing factors to higher rates of default among Black borrowers that deserve future attention and study, though it is beyond the scope of this paper to identify a causal mechanism.

Suggested Citation

  • Marie‐Cécile Vekemans & Gianna Short & Charles B. Dodson & Bruce L. Ahrendsen, 2024. "Loan survival: Are Black farmers more likely to default?," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 46(1), pages 137-153, March.
    • Handle: RePEc:wly:apecpp:v:46:y:2024:i:1:p:137-153
    DOI: 10.1002/aepp.13400
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    References listed on IDEAS

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    1. Bruce L. Ahrendsen & Charles B. Dodson & Gianna Short & Ronald L. Rainey & Heather A. Snell, 2022. "Beginning farmer and rancher credit usage by socially disadvantaged status," Agricultural Finance Review, Emerald Group Publishing Limited, vol. 82(3), pages 464-485, January.
    2. Jonathan B. Dressler & Jeffrey R. Stokes, 2010. "Survival analysis and mortgage termination at AgChoice ACA," Agricultural Finance Review, Emerald Group Publishing Limited, vol. 70(1), pages 21-36, May.
    3. Coppess, Jonathan, 2021. "The History and Development of USDA Farm Loan Programs, Part 3: 1946 to 1961," farmdoc daily, University of Illinois at Urbana-Champaign, Department of Agricultural and Consumer Economics, vol. 11(46), March.
    4. Megan Horst & Amy Marion, 2019. "Racial, ethnic and gender inequities in farmland ownership and farming in the U.S," Agriculture and Human Values, Springer;The Agriculture, Food, & Human Values Society (AFHVS), vol. 36(1), pages 1-16, March.
    5. Coppess, Jonathan, 2021. "Reviewing the History and Development of USDA Farm Loans, Part 2: 1937 to 1946," farmdoc daily, University of Illinois at Urbana-Champaign, Department of Agricultural and Consumer Economics, vol. 11(36), March.
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