Limits to capital: Assessing the role of race on the Paycheck Protection Program for African American farmers in America

Sant’Anna, Ana Cláudia; Kim, Kevin N.; Demko, Iryna

doi:10.1002/aepp.13338

Applied Eco Perspectives Pol

2023

DOI: 10.1002/aepp.13338

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Limits to capital: Assessing the role of race on the Paycheck Protection Program for African American farmers in America

Ana Cláudia Sant’Anna

Kevin N. Kim

Iryna Demko³

Abstract: We examine Paycheck Protection Program (PPP) lending among African American and white farmers. Using data from the U.S. Small Business Administration we run fixed effect estimations with a Mills inverse ratio. Our findings suggest discrimination due to limited capital access. We find statistically significant differences between approved loan amounts among African American farmers due to income level and location of their farms. These had minimal effects on white farmers. Our results call for policymakers to c… Show more

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Cited by 5 publications

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“…There have been studies investigating differences across race in the distribution of government programs like crop insurance (Teal & Stevens, 2023), Market Facilitation Program and Coronavirus Food Assistance Program (Giri et al, 2022), Paycheck Protection Program (Demko & Sant'Anna, 2023; Sant'Anna et al, 2023), and Farm Service Agency loans (Escalante et al, 2018; Ghimire et al, 2020; Mishra et al, 2023; Wu et al, 2012). To our knowledge this is the first paper to examine the distribution of tax benefits to farm households by race and ethnicity.…”

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An analysis of tax benefits by race and ethnicity for farm households

McDonald,

Durst

2024

Applied Eco Perspectives Pol

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This research simulates the impact on tax liabilities of five tax provisions that provide benefits to farm households by race and ethnicity. Using pooled data from the Agricultural Resource Management Survey (2017–2021), we find that, relative to White non‐Hispanic principal operator farm households, certain business tax benefits are less prevalent and of lower value for Hispanic, African American, and Native American principal operator farm households due to differences in income and investment levels. Household tax credits are significantly higher for Hispanic and Native American principal operator farm households and Asian principal operator farm households have significantly higher total tax benefits from the five provisions examined.

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An analysis of tax benefits by race and ethnicity for farm households

McDonald,

Durst

2024

Applied Eco Perspectives Pol

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Did Biden-Harris’s reforms on the Paycheck Protection Program reduce racial disparities in lending?

Filomeni,

Querci

2024

Rev Quant Finan Acc

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Introduced under the Trump-Pence Administration, the Paycheck Protection Program (PPP) provided short-term relief loans to small American businesses during the peak of the Coronavirus pandemic. The initial design of the PPP faced significant criticism from researchers due to racial disparities, among other issues, in its lending process. Minority groups received smaller PPP loan amounts during the original two tranches released in 2020. To increase equitable access for all, in February 2021 the Biden-Harris Administration enforced swift changes to the initial PPP aimed at favouring access to PPP loans for minority-owned small businesses that had been disadvantaged by the program’s original design under the Trump-Pence Administration. By exploiting a granular dataset of 1,759,270 PPP loans granted between Q2 2020 and Q2 2021 and by implementing a difference-in-differences approach (DID), this paper provides novel evidence on the effectiveness of the Biden reforms in reducing racial disparities within the Paycheck Protection Program. Indeed, we observe a significant increase in the volume of PPP loans granted to minority-owned businesses in the period following the Biden-Harris Administration’s reforms. Furthermore, among different minority groups, the reforms appear most effective for Native American minority groups (including American Indians, Alaska Natives, Native Hawaiians and/or Other Pacific Islanders), followed by Black Americans and Asian business owners. Our findings offer novel contributions to the existing literature on institutional discrimination, particularly regarding the initial PPP design. Our findings are especially valuable for policy makers as they underscore the importance of radical changes in addressing racial disparities. Our paper also offers evidence of how a public credit guarantee program should be designed to empower and promote economic inclusion for all, regardless of ethnicity, aligning with the UN’s Sustainable Development Goals.

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Government payments and farm debt utilization during the pandemic

Chandio,

Katchova,

Subedi

et al. 2024

AFR

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PurposeThis study examines the heterogeneous relationship between ad-hoc support policies, high government payments, low interest rates and farm debt use across farms of different sizes and across farm operators of different races, genders and experiences to inform the 2024 Farm Bill discussions.Design/methodology/approachUtilizing USDA’s Agricultural Resource Management Survey data for 2020 and 2021, this study characterizes the differences in short-term farm debt use and the amount of short-term debt during the COVID-19 pandemic period across several farm and farmer types using double selection LASSO and regression analysis.FindingsResults show positive associations between government payments and debt use for all farm types and farmer demographics except for residence farms and non-white farmers, which may be due to their limited access to credit. Findings also indicate that farms that could already access credit, like commercial farms, increased their short-term debt during the pandemic per the decrease in interest rates. Moreover, the 2018 Farm Bill extended certain commodity support and direct and guaranteed loan program participation provisions that were previously more closely restricted. Beginning farmers seemed more likely to use short-term debt in response to higher pandemic government payments than their more experienced counterparts.Practical implicationsThe insights from this study are timely and useful for policymakers for designing and implementing programs related to the new 2024 Farm Bill.Originality/valueOne of the explanations for the results is that beginning farmers have been more likely to use debt than most other groups of operators, signaling the success of special credit provisions. Our results are relevant to making upcoming policies related to female and nonwhite farm and ranch operators.

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Limits to capital: Assessing the role of race on the Paycheck Protection Program for African American farmers in America

Cited by 5 publications

References 25 publications

An analysis of tax benefits by race and ethnicity for farm households

An analysis of tax benefits by race and ethnicity for farm households

Did Biden-Harris’s reforms on the Paycheck Protection Program reduce racial disparities in lending?

Government payments and farm debt utilization during the pandemic

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