From Soil Loss to Financial Loss: The Impact of Soil Erosion on Farm Bankruptcy in the US Midwest

Jebina Shrestha, Le Chen, Aaron Smith and Carlos Trejo-Pech

No 404336, 2026 Annual Meeting, July 26 - 28, 2026, Kansas City, Missouri from Agricultural and Applied Economics Association

Abstract: This study examines the impact of soil erosion on farm bankruptcy in the United States (US) Midwest. Using a novel county-level panel dataset that combines Chapter 12 bankruptcy filings from the U.S. Courts with soil erosion measures from the USDA Natural Resources Conservation Service National Resources Inventory for the period 1992 to 2017, we investigate whether higher soil erosion increases farm bankruptcy rates. We use linear panel fixed effects models and a number of robustness checks to achieve the study objective. We find that counties with higher soil erosion tend to have higher Chapter 12 bankruptcy filing rates. The results suggest that persistent soil degradation may weaken the income-generating capacity of farmland and reduce farms’ ability to meet debt obligations. These findings provide new evidence that the economic consequences of soil erosion extend beyond productivity and environmental losses to severe farm financial outcomes, with implications for soil conservation policy, agricultural credit markets, and farm financial stability.

Keywords: Agricultural Finance; Farm Management (search for similar items in EconPapers)
Pages: 30
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea26:404336

DOI: 10.22004/ag.econ.404336

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