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Does Off-Farm Work Improve Farm Income? Empirical Evidence from Tolon District in Northern Ghana
Does Off-Farm Work Improve Farm Income? Empirical Evidence from Tolon District in Northern Ghana
Anang, Benjamin Tetteh;Nkrumah-Ennin, Kwame;Nyaaba, Joshua Anamsigiya
Hindawi Advances in Agriculture Volume 2020, Article ID 1406594, 8 pages https://doi.org/10.1155/2020/1406594 Research Article Does Off-Farm Work Improve Farm Income? Empirical Evidence from Tolon District in Northern Ghana Benjamin Tetteh Anang , Kwame Nkrumah-Ennin, and Joshua Anamsigiya Nyaaba Department of Agricultural Economics and Extension, Faculty of Agriculture, University for Development Studies, Tamale, Ghana Correspondence should be addressed to Benjamin Tetteh Anang; firstname.lastname@example.org Received 3 October 2019; Revised 30 June 2020; Accepted 25 August 2020; Published 7 September 2020 Academic Editor: Othmane Merah Copyright © 2020 Benjamin Tetteh Anang et al. )is is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. Participation of farm households in oﬀ-farm work has gained prominence in recent times as an income diversiﬁcation strategy. )e eﬀect of oﬀ-farm work on farm income is however unclear. )is paper therefore sought to provide empirical evidence of the income eﬀect of oﬀ-farm activity participation using a cross section of maize farmers in Tolon District of Ghana as a case study. In order to account for sample selection bias, the Heckman selection model was used to estimate the factors inﬂuencing participation in oﬀ-farm work and the determinants of farm income. Furthermore, the study employed propensity score matching to evaluate the impact of oﬀ-farm work on farm income. )e results indicate that participation in oﬀ-farm work is inﬂuenced by sex, age, and years of formal education of the respondent, farm size, and number of dependents while farm income is inﬂuenced by age of the respondent, farm size, and access to credit. In addition, the result of the propensity score matching revealed that participants in oﬀ-farm work increased their farm income by at least GH¢ 1702 as a result of income diversiﬁcation. )e rural economy therefore provides oﬀ-farm and on-farm linkages that enhance farmers’ income from agriculture. )e creation of employment oppor- tunities outside the farm will therefore complement on-farm work and enhance income from farming. According to the existing literature, there is increasing 1. Introduction recognition of the role that oﬀ-farm work plays particularly Most developing countries including Ghana depend on in smallholder agriculture in developing countries . For agriculture as an importance source of livelihood. It is most agrarian communities, farming is considered as the estimated that in Ghana, more than 60 percent of the main occupation. Oﬀ-farm work is thus any activity un- population are engaged in agriculture as a source of dertaken by the farmer or farm household outside farming as livelihood . Majority of the farmers are smallholders an additional source of income. )is is opposed to nonfarm who cultivate less than 2 hectares of farm land  and work which relates to all activities that are not related to account for about 80 percent of the food produced locally farming (such as dressmaking and commerce). Hence, oﬀ- . Yields of most crops are generally below achievable farm work includes farm-related activities carried out by levels due to reliance on natural rainfall for production, farm households for income such as exchange of labour for low adoption of improved production technologies, and cash on another farmer’s farm. )e major sources of oﬀ- lack of access to services such as agricultural extension farm income in Ghana include commerce, agroprocessing, and farm credit. In response to liquidity constraints and charcoal production, seasonal migration, brewing of local declining farm incomes, many smallholders diversify gin, basketry, and collection and sale of ﬁrewood [4, 5]. production and have multiple sources of income apart According to Chang and Wen , participation in oﬀ-farm from farming, which have implications for agricultural work by farm households is a persistent phenomenon productivity and farm income. globally, with a steady increase in the dependence of farm 2 Advances in Agriculture does income from oﬀ-farm work ease the liquidity con- families on income from oﬀ-farm work. Income from oﬀ- farm work is regarded as an important source of livelihood straints of farm households enabling greater use of farm resources in production? To the extent that farmers are able for farm households and a means to diversify household income source. A study in rural Ghana by Jolliﬀe  in- to invest earnings from oﬀ-farm activity into their farm dicated that about 74% of Ghanaian farm households par- business, farm output and productivity are expected to grow ticipated in oﬀ-farm work. Also, research showed that, on and exert a positive inﬂuence on farm income. average, 65% of American farm households were engaged in )is study is motivated by the lack of empirical evidence oﬀ-farm work . Chang and Wen  also reported that of the eﬀect of oﬀ-farm work on farm income of smallholder about 75% of Taiwanese farm households earned oﬀ-farm farmers in Ghana. )e objective of this paper is therefore to assess the contribution of oﬀ-farm work to farm income in salaries. )e increasing importance of oﬀ-farm work to farm Tolon District of Ghana. )e paper contributes to the lit- erature on income diversiﬁcation and its eﬀects on house- households’ economic well-being has generated a lot of discussion among researchers regarding the role oﬀ-farm hold welfare by empirically estimating the magnitude and direction of impact of oﬀ-farm work on farm income of work plays in household welfare, especially in terms of food security, agricultural productivity, and household income. It smallholder farmers. is a commonly held view that participation in oﬀ-farm work )e rest of the paper is structured as follows. Section 2 is expected to reduce on-farm labour availability and its describes the methods used in the study, which provides a allocation and thus constrain agricultural productivity. On background of the study area, sampling and data collection, the contrary, it is also believed that oﬀ-farm work enables and method of data analysis and data description. Section 3 farm households to stabilize household income and reduce presents the results and discussion of the major ﬁndings of the study. )e conclusion and recommendations from the vulnerability and uncertainties associated with agricultural production. As indicated by the extant literature, partici- study are provided in Section 4. pation in oﬀ-farm work has two eﬀects on production: a negative lost-labour eﬀect and a positive income or liquidity- 2. Materials and Methods relaxing eﬀect . )e lost-labour eﬀect occurs when the household loses farm labour to oﬀ-farm activities, while the 2.1. Study Area and Sampling. )e study was conducted in income eﬀect occurs when the household earns income from the Tolon District of the Northern Region of Ghana. )e area oﬀ-farm activities which it can invest into farming. )e eﬀect is part of the northern savannah zone of Ghana and is well of oﬀ-farm work on farm income will however depend on known for its agricultural production. )e area experiences a which of the two eﬀects is stronger. single rainfall regime per annum and is known for the Oﬀ-farm work as a risk management tool that reduces cultivation of crops such as rice, maize, and groundnut, income variability of farm households has been reported by which are important staples. )e population of the district some authors [10, 11]. As demonstrated by Mishra and stood at 72,990 according to the 2010 Population and Goodwin , farm households may depend on oﬀ-farm Housing Census (PHC). An estimated 92% of the population work to stabilize household income because farm com- are engaged in agriculture. modity prices are more variable than oﬀ-farm wages. It is )ree communities, namely, Nyankpala, Dundo, and expected from the theory of production that a risk-averse Gbushalagu, were selected for the study due to their agri- farmer will choose to allocate labour and other resources to cultural potential. Fifty farmers were randomly selected activities that are less risky to the point where the expected from each community to give a total sample of 150 farmers marginal returns are equal for the diﬀerent activities. )e who were interviewed face-to-face using a semistructured higher variability in farm commodity prices is therefore questionnaire. Cochran’s formula for sample size determi- expected to drive participation in oﬀ-farm work. nation indicated that the number of farmers selected for the An earlier study by Lanjouw  noted that the rise in study is a representative sample. In the absence of a well- oﬀ-farm activity by farm households is as a result of de- deﬁned sample frame, households were selected at random clining farm incomes and the need to safeguard against in each community by taking into account the distribution production risks. )is ﬁnding is corroborated by a recent of households. Information solicited from farmers included study by Akinrinde et al.  which indicated that declining individual, household and farm characteristics, production farm income is the main reason for income diversiﬁcation activities, production costs and returns, and access to among Nigerian farmers. Alasia et al.  on the other hand production resources and services. view participation in oﬀ-farm work as a form of self-in- surance which enables farm households to stabilize household income. 2.2. Empirical Models. Participation in oﬀ-farm work and Several studies allude to a positive eﬀect of oﬀ-farm work the factors determining farm income were analysed em- on agricultural productivity, food security, and household pirically using the Heckman Selection Model, while a income of farm households [16–18]. For most farm nonparametric treatment eﬀect model was used to estimate households, farm income constitutes a signiﬁcant part of the the eﬀect of oﬀ-farm work on farm income. )e Heckman total household income. A policy question which is relevant selection model can be estimated using either maximum to most rural farm households is whether or not oﬀ-farm likelihood or a two-step approach. )is study adopted the work contributes directly to farm income. In other words, maximum likelihood approach because it overcomes some Advances in Agriculture 3 of the limitations associated with the two-step approach φ