The Agricultural Technology--Market Linkage under Liberalisation in Ghana: Evidence from Micro Data

Tsegaye Yilma, Ernst Berg and Thomas Berger

Journal of African Economies, 2008, vol. 17, issue 1, 62-84

Abstract: Combinations of factors, including inappropriate economic policies, have contributed to the poor economic performance of sub-Saharan Africa (SSA). The impacts of some corrective policy measures, both on the macro economy and on the rural economy, are not very clear because they have led to unintended consequences, such as increasing poverty and inequality. This paper examines the effect of the removal of subsidised agricultural credit for irrigation farmers in Ghana, a country of pioneering reforms in SSA. A theoretical model of this scenario is constructed, in which it is shown that under multiple-market imperfections farmers resort to alternative income sources to finance irrigation. Particularly in the presence of off-farm alternatives, multiple-market imperfections can induce both on- and off-farm income-generating activities during the same season. This model is subsequently tested and validated with household data collected from northern Ghana. The empirical analysis shows that there is a strong complementarity between irrigation farming and off-farm employment, two activities that depend heavily on labour endowment. The observed complementarity suggests that in weak credit markets irrigation farmers generate liquidity from off-farm activities, which could lead to a demand for larger family size in the long run. Copyright 2008 The author 2007. Published by Oxford University Press on behalf of the Centre for the Study of African Economies. All rights reserved. For permissions, please email: journals.permissions@oxfordjournals.org, Oxford University Press.

Date: 2008
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