Rural Issues Session Summary

Moderator: Richard Todd, Federal Reserve Bank of Minneapolis
Discussant: Chuck Hassebrook, Center for Rural Affairs

"Persistent Poverty in Rural America: Identifying the Nexus Between Land Tenure, Homeownership, and Long-Term Poverty"
Lance George, Housing Assistance Council

"A Reassessment of the Social and Economic Benefits of Rural Schools on Local Communities: The Case of New York State"
John W. Sipple (presenter), Sutee Anantsuksomsri, Nij Tontisirin, and Joe Francis, Cornell University

"Information Externalities and Small Business Lending by Banks: A Comparison of Urban and Rural Counties in the U.S."
Stephan Weiler (presenter), Colorado State University, Ronnie Phillips, Colorado State University, and Natalia Kravchenko, Philip Morris International

"Broadband Internet in Rural and Minority Households: Adoption and Use of the Internet and Its Implications"
Peter Stenberg, Economic Research Service

Rural communities face many challenges in community and economic development. This panel offered insights into a few of the most critical issues—housing, schools, entrepreneurship, and broadband infrastructure. One main challenge is persistent and long-term poverty in rural communities and the often complicated land agreements and contracts that impede homeownership and wealth accumulation. The panel discussed rural education, with specific attention to school consolidation and socioeconomic impacts of school closures. It examined issues related to rural small business and broadband access. More specifically, panelists discussed the lack of access to external financing from both banks and capital markets for small businesses in rural markets and the use of broadband Internet in rural and minority households.

Lance George of Housing Assistance Council brought attention to persistently poor rural areas using common economic distress indices and discussed how these areas differ in terms of demographic and cultural composition, geography, and underlying economies. He also shed light on the prevalence of unique land tenure issues such as contract for deeds, absentee ownership, mineral rights, heirs' property, tribal trust lands, and leased land for manufactured homes. Such land-home arrangements complicate homeownership, wealth accumulation, and the provision of affordable housing in rural areas. George suggested that clear knowledge of land tenure obstacles and development of potential remedies and policies will lead economically marginalized rural homeowners to maximize their current assets.

John W. Sipple of Cornell University discussed the effects of school district consolidation on the socioeconomic well-being of rural communities, with special attention given to the role of rural schools on local and regional development during the economic upturns and downturns of the past two decades. The study promotes a more complex discussion of the commonly held argument that closing a school destroys its local community and presents a more nuanced set of implications for rural communities—namely, differential impacts on incomes versus housing values.

Stephan Weiler of Colorado State University focused on a critical small business issue, access to credit. His presentation addressed the information available to bank loan officers on small and medium enterprises (SMEs). Weiler divided such information into three segments: information about competition in the local banking market, success and failures of other SMEs in the local market, and how well other banks are performing in the local market. He examined the impact of such information on bank lending in rural and urban areas. His paper confirms the importance of entrepreneurial information in influencing the level of SME lending by banks and clarifies the role of bank size, lending competition, and information on community banks' propensity to lend to small businesses.

Peter Stenberg of the U.S. Department of Agriculture's Economic Research Service examined the changes and use of broadband Internet in rural and minority households. The paper shows that the Internet is used for information, education, job hunting, and other activities but usage varies across households, with poorer households less likely to use the Internet. The paper also analyzes causes of use and nonuse and identifies cost as a major factor; initial knowledge of the Internet and other factors also play a role in use/nonuse. The study draws attention to programs in schools and libraries that help mitigate the cost disadvantage of Internet use for rural and minority households. Several other proposed programs to tackle cost disadvantage were discussed, such as the Federal Communications Commission's Universal Service program and policy proposals included in the five-year farm bill to support rural broadband infrastructure development.