An Empirical Investigation of Short- and Long-run Agricultural Wage Formation in Ghana

Awudu Abdulai and Christopher Delgado

Oxford Development Studies, 2000, vol. 28, issue 2, 169-185

Abstract: This paper investigates the factors that influence real agricultural wage rates in Ghana, a critical issue in that country for promoting successful macroeconomic adjustment to structural changes in incentives. It is based on 1957-91 data. The Johansen cointegration framework is used to quantify and to examine the stability following major shocks of new long-run relationships among agricultural and urban wage rates, the domestic terms of trade between agriculture and non-agriculture, urban unemployment, capital stock in agriculture and the size of the rural population. An error correction model is then used to investigate short-run dynamic relationships among the variables. Results show that: (1) there is only one stable equilibrium relationship among agricultural wage rates and their determinants in the long run; (2) a 1% change in the domestic terms of trade between agriculture and non-agriculture leads to a 0.48% change in the real agricultural wage rate in the short run and a 0.83% change in the long run; and (3) the analysis suggests a one-time and one-way upwards structural shift of 3.6% in real agricultural wages during the 1980s.

Date: 2000
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Working Paper: An empirical investigation of short and long-run agricultural wage formation in Ghana (1999)
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DOI: 10.1080/713688312

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