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Farm Debt, Default, and Foreclosure: An Economic Rationale for Policy Action

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  • Howard D. Leathers
  • Jean-Paul Chavas

Abstract

Economic analysis of farm programs typically focusses on economic costs. Here we show that, because of market failures and imperfections, there are possible economic benefits to be derived from programs which reduce or eliminate the threat of default and foreclosure. A production model of an indebted firm is developed and serves as a basis for an aggregate model which identifies possible costs and benefits from a program of transfers to indebted farmers. The challenge facing policy makers is to design programs which capture the benefits of reducing the probability of default while minimizing perverse incentive effects of such programs.

Suggested Citation

  • Howard D. Leathers & Jean-Paul Chavas, 1986. "Farm Debt, Default, and Foreclosure: An Economic Rationale for Policy Action," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 68(4), pages 828-837.
    • Handle: RePEc:oup:ajagec:v:68:y:1986:i:4:p:828-837.
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    File URL: http://hdl.handle.net/10.2307/1242129
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    Citations

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    Cited by:

    1. Christophe Gouel, 2012. "Agricultural Price Instability: A Survey Of Competing Explanations And Remedies," Journal of Economic Surveys, Wiley Blackwell, vol. 26(1), pages 129-156, February.
    2. Vaida Stulpinienė & Vida Čiulevičienė, 2014. "Agricultural Support Influence On Farm Financial Stability," Economy & Business Journal, International Scientific Publications, Bulgaria, vol. 8(1), pages 936-946.
    3. Chavas, Jean-Paul, 1987. "On Risk Modeling And Its Implications For Economic Analysis," Regional Research Projects > 1987: S-180 Annual Meeting, March 22-25, 1987, San Antonio, Texas 272333, Regional Research Projects > S-180: An Economic Analysis of Risk Management Strategies for Agricultural Production Firms.
    4. Christophe Gouel, 2014. "Food Price Volatility and Domestic Stabilization Policies in Developing Countries," NBER Chapters, in: The Economics of Food Price Volatility, pages 261-306, National Bureau of Economic Research, Inc.
    5. repec:ags:ijag24:344526 is not listed on IDEAS
    6. Gohin, Alexandre & Rault, Arnaud, 2012. "Assessing the economic costs of an outbreak of Foot and Mouth Disease on Brittany: A dynamic computable general equilibrium approach," 123rd Seminar, February 23-24, 2012, Dublin, Ireland 122438, European Association of Agricultural Economists.
    7. Innes, Robert, 1987. "Agency Costs, Farm Debt And Foreclosure: Positive And Policy Issues," Working Papers 225811, University of California, Davis, Department of Agricultural and Resource Economics.
    8. Alexandre Cordier & Jean Gohin & Stephane Krebs & Arnaud Rault, 2013. "Dynamic Impacts of a Catastrophic Production Event: The Foot‐and‐Mouth Disease Case," Risk Analysis, John Wiley & Sons, vol. 33(3), pages 480-492, March.
    9. Gohin, Alexandre & Rault, Arnaud, 2013. "Assessing the economic costs of a foot and mouth disease outbreak on Brittany: A dynamic computable general equilibrium analysis," Food Policy, Elsevier, vol. 39(C), pages 97-107.
    10. Gohin, Alexandre & Rault, Arnaud, 2012. "Assessing the economic costs of an outbreak of Foot and Mouth Disease on Brittany: A dynamic computable general equilibrium," 86th Annual Conference, April 16-18, 2012, Warwick University, Coventry, UK 134712, Agricultural Economics Society.
    11. Just, Richard E. & Zilberman, David, 1992. "In Defense Of Fence To Fence: Can The Backward Bending Supply Curve Exist?," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 17(2), pages 1-9, December.
    12. Pederson, Glenn D., 1987. "Debt Resolution Through Mediation: Extension-Research Linkages," Staff Papers 13272, University of Minnesota, Department of Applied Economics.

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