FARM SIZE, TECHNICAL EFFICIENCY AND WELFARE EFFECT OF FARMING HOUSEHOLDS IN GHANA

Abstract

High incidence of poverty is one of the major development challenges in developing countries like Ghana. This has mainly been caused bylow productivity due to limited use of improved technology and inefficiency among Ghanaian crop farmers. This study investigates the interrelations among farm size, technical efficiency and poverty levels of farming households. Technical efficiency was estimated using the parametric stochastic frontier and the Three Stage Least Squares (3SLS) was also used to analyze the relationship between farm size and welfare, due to the reverse causality between these variables. The results of the stochastic frontier model confirmed the well-known inverse relationship between farm size and technical efficiency, while that of 3SLS revealed a positive relation between welfare and farm size. The majorityof Ghanaian crop farmers were found to be operating 50% below the frontier due to improper application of agriculture extensionknowledgeandinefficientuseoflandresources.Theinefficiencyofthese farmers was found to be negatively influenced by farm size, household size and age. The positive influencing factors of inefficiency were gender of household head, extension service and marital status. The size of farm a farmer operates was negatively affected by gender, age and off farm work. The positive significant determinants of farm size were household size, land ownership, household labour, hired labour, ownership of farm equipment and locality. Age, household size, land ownership, marital status and distance were found to be the negative significant factorsofGhanaianfarmers’welfare.Thepositiveinfluencingfactorsweregender, education, credit access, off farm work, cooperative participation, ownership of vehicleanddurable asset. The studyconcluded that smallholders are moreefficient than those with the relatively large farms. These efficient farmers were also poor, confirming previous empirical findings. The welfare of Ghanaian farmers can be improvedwithappropriateadjustmentinlandpolicies,investmentinhumancapital and financial supports. Poverty gaps among rural and urban dwellers should be resolved through extension of economic activities to rural areas. Government should also strength market systems to favour farmers in terms of pricing, so as to improve their returns to production.