POVERTY, INCOME DIVERSIFICATION AND WELFARE IN NORTHERN GHANA

Abstract

Households in several sub–Saharan African countries including Ghana usually have to cope with poverty, income and consumption volatility by diversifying their income sources. Using the recent wave of the Ghana Living Standard Survey (GLSS 6), we examine the determinants of participation in farm employment as an income diversification strategy and its impact on welfare in the poorest regions of Ghana. Our findings show that marital status, household size, education and access to credit are important drivers of participation in farm work albeit regional differences. The effect of age on participation decision is intrinsically non–linear in an inverted U–shaped fashion. Further findings from the propensity score matching reveal that engaging in farm employment positively and significantly impacts on welfare. While we recommend substantial investment in the agriculture sector, it is simplistic to assume that the resource allocation in itself will engender the needed agricultural productivity and ultimately translate into improved welfare. Moreover, while the obsession with agricultural–led growth as a poverty reduction strategy has genuine merits, we submit that non-farm activities also make substantial contributions to household welfare and can play significant roles in transforming northern Ghana.