Farmers’ livelihood in rural Ghana: empirical investigation into risk perceptions and attitudes

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November, 2015
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Agriculture has and continues to be the backbone of the Ghanaian economy contributing about 21.5% to GDP and employs about 50% of the labour force and contributes substantially to the foreign exchange earning of the economy. Agriculture in Ghana is dominated by smallholder farmers who produce substantial amount of the food needs of Ghanaians. Most smallholder farmers live in the rural areas of Ghana producing a wide range of crops, from cocoa to pepper to cassava and plantain. Notwithstanding the importance of smallholder farmers’ contribution to the economy of Ghana, rural households in Ghana are the poorest as poverty is basically a rural phenomenon in Ghana. These farmers face a wide range of risks that impede their ability to expand and increase their income and ultimately their welfare. These risks and their attitude towards them have profound impact on their output and welfare as their perception and attitudes determine their responses to unfavourable conditions. The research sought to examine the livelihood of rural farmers in Ghana, their risk perception, risk attitudes and how risk perceptions and attitudes impact on their economic, and their overall livelihood. Primary data were gathered from a sample of 1,200 respondents from a field survey of rural farmers from three districts in Ghana selected from three different regions; Offinso North District from Ashanti Region, Techiman Municipality from Brong Ahafo Region and Sefwi Wiawso Municipality from Western Region. Face-to-face questionnaires were administered to the respondents to collect the relevant information from the respondents. Five components of livelihood, Economic, Health, Food, Education and Empowerment were computed. Using the Equally Likelihood Certainty (ELCE), and with three utility functional forms, and the Arrow-Pratt risk aversion formula, risk aversion position of the rural farmers were determined. Using ordinary vii least squares, multiple regressions were run to examine the associations between livelihood and socioeconomic characteristics of respondents, risk perception and socioeconomic characteristics and risk attitudes and socioeconomic characteristics as well as the association between risk perception and attitudes and livelihood. The results from the study show that plantation crop farmers are more secured in terms of livelihood than that of food and vegetable crop farmers. Rural farmers in Ghana located at plantation crop producing areas, have higher economic and overall security status than others located at other areas. The results show that plantation crop farmers consider disease and pests and credit availability as the most important risks that they face whereas food crop farmers perceive yield variability, disease, and pests as the most important risks. However, vegetable crop farmers perceive output prices and yield variability as the most important risks conditions. The work found that livelihood is generally low in the rural areas of Ghana, with differences in livelihood based on location of the farmers and crop type. Farmers were also found to be risk averse with the level of aversion changing with location, crop type and the kind of utility function employed. The research recommends that government can institute policies like expansion of cocoa scholarship to other farmers’ wards, irrigation schemes, establishment of small to medium sized food processing firms for price stabilization to enhance farming in the rural areas to guarantee the income of farmers and their overall livelihood. It is also recommended that any policies enacted should take into consideration the differences in the risk perception and the attitudes of farmers to these risks in order to make the policies work.
Thesis submitted in partial fulfilment for the award of the degree of Doctor of Philosophy in Economics.