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Risk Management and Social Visibility in Ghana
April 2009
Vanderpuye-Orgle, Jacqueline and Christopher B. Barrett

In this paper we test for risk pooling within and among social networks to see if the extent of informal insurance available to individuals in rural Ghana varies with their social visibility. We identify a distinct subpopulation of socially invisible individuals who tend to be younger, poorer, engaged in farming, recent arrivals into the village who have been fostered and are not members of a major clan. While we cannot reject the null hypothesis that individual shocks do not affect individual consumption and that individual consumption tracks network and village consumption one-for-one among the socially visible, risk pooling fails for the socially invisible subpopulation. These results have important implications for the design of social protection policy.
In African Development Review 21(1):5-35, April, 2009



Are Africans Practicing Safer Sex: Evidence from Demographic and Health Surveys for Eight Countries
January 2008
Glick, Peter and David E. Sahn

We use repeated rounds of Demographic and Health Survey data from eight African countries to examine changes in and determinants of three HIV risk behaviors: age at first intercourse; number of current sexual partners, and use of condoms. As a prelude, we assess the within- country comparability of DHS surveys over time. We find some evidence of changes in sample composition, which is easily handled in a multivariate framework, and find evidence as well of changes in how people respond to questions about HIV behavior. Because of the latter, which likely represents an increase in social desirability bias over time, our estimates of risk reduction may be upper bounds on the true effects. Overall the picture is one of reductions in risk behaviors over recent 4-6 year intervals, especially with respect to condom use; in some cases the changes seem large given the short time periods involved. With some exceptions, however, the extent and pervasiveness of these changes seems inadequate in relation to the urgency of the public health crisis represented by AIDS. With respect to the determinants of behaviors, schooling and wealth have contradictory impacts on risk behavior: they both tend to increase the likelihood of using condoms while (for men) also increasing the demand for additional sexual partners.
Presented at the International Union for the Scientific Study of Population (IUSSP) Seminar on “Interactions between Poverty and HIV/AIDS,” Cape Town, South Africa, December 2005.
Alternate version in Economic Development and Cultural Change 56(2):397-439, January, 2008



Trade Reforms, Human Capital and Poverty: A Pseudo-Panel Analysis for Ghana
March 2007
Ackah, Charles

In this paper, we present one of the first direct microeconometric studies of the impact of trade protection on household income in Ghana. Tariff measures at the two-digit ISIC level are matched to Ghanaian household survey data for 1991/92 and 1998/99 to represent the tariff for the industry in which the household head is employed. We examine the possibility that the effect of protection on income might not be uniform across households characterized by different skill levels. Specifically, we allow the relationship between welfare and trade policy to differ for households with different levels of education. In the absence of suitable panel data, the analysis applies pseudo-panel econometric techniques to our repeated cross-section data. This method has rarely been used in poverty analysis. The results suggest that higher tariffs are associated with higher incomes for households employed in the sector, so tariff reductions may reduce incomes (and increase poverty), at least in the short run, but with differing effects across skill groups. We find that this positive effect of protection is disproportionately greater for low skilled labour households, suggesting an erosion of welfare of unskilled labour households would result from trade liberalization. We conclude that contemplating trade liberalization without recognizing the complementary role of human capital investment may be a sub-optimal policy for the poor, at least in the short-run.
Prepared for the AERC-Cornell Conference on “Bottom-Up Interventions and Economic Growth in Sub-Saharan Africa,” May 31-June 1, 2007, Nairobi, Kenya



Robust Multidimensional Spatial Poverty Comparisons in Ghana, Madagascar, and Uganda
April 2006
Duclos, Jean-Yves, David E. Sahn, and Stephen D. Younger

We investigate spatial poverty comparisons in three African countries using multidimensional indicators of well-being. The work is analogous to the univariate stochastic dominance literature in that we seek poverty orderings that are robust to the choice of multidimensional poverty lines and indices. In addition, we wish to ensure that our comparisons are robust to aggregation procedures for multiple welfare variables. In contrast to earlier work, our methodology applies equally well to what can be defined as "union", "intersection," or "intermediate" approaches to dealing with multidimensional indicators of well-being. Further, unlike much of the stochastic dominance literature, we compute the sampling distributions of our poverty estimators in order to perform statistical tests of the difference in poverty measures. We apply our methods to two measures of well-being, the log of household expenditures per capita and children’s height-for-age z-scores, using data from the 1988 Ghana Living Standards Survey, the 1993 Enquête Permanente auprès des Ménages in Madagascar, and the 1999 National Household Survey in Uganda. Bivariate poverty comparisons are at odds with univariate comparisons in several interesting ways. Most importantly, we cannot always conclude that poverty is lower in urban areas from one region compared to rural areas in another, even though univariate comparisons based on household expenditures per capita almost always lead to that conclusion.
In World Bank Economic Review 20(1):91-113



Persistent Poverty in North East Ghana
February 2006
Whitehead, Ann

This paper explores local poverty and wealth inequality in the Upper East Region of northern Ghana in the period from 1975-89. Land was not scarce and the social management of household membership and household labour were critical to household security, but this social management was not independent of wealth status. There was a virtuous circle between wealth and household labour supply and a vicious circle between poverty and small household size. Poverty traps existed so that those with too little labour and too little wealth engaged in strategies which entrenched them in poverty.
In Journal of Development Studies 42(2): 248-277, 2006
In Understanding and Reducing Persistent Poverty in Africa, Christopher Barrett, Peter Little, Michael Carter (eds.), Routledge, 2007.



Ghana’s Economy at Half Century: An Overview of Stability, Growth and Poverty
November 2005
Aryeetey, Ernest and Ravi Kanbur

As Ghana enters its second half century, we are faced with a paradox. Despite a solid transition to democracy in the political situation, despite recorded recovery in the last fifteen years from the economic malaise of the two decades preceding, and despite reductions in measured poverty, there is widespread perception of failure of the economic and political system in delivering improving living standards to the population. This essay introduces a volume of papers that call for a deeper examination of the macro level data on growth and on poverty. A sectoral and regional disaggregation reveals weaknesses in the levels and composition of private investment, in the generation of employment, in sectoral diversification, and in the distribution of the benefits of growth. At the same time, the push for decentralization, and for better allocation, monitoring and implementation of public expenditure has raised more questions than it has answered. These are the challenges that Ghana faces if it is to fulfill the bright promise of its independence in 1957. The papers in this volume set out an analytical agenda that we hope will help in laying the ground work for the path that the nation’s policy makers will have to steer on the road to 2057.
Introduction to Ernest Aryeetey and Ravi Kanbur (editors), The Economy of Ghana: Analytical Perspectives on Stability, Growth and Poverty, James Currey, 2008.



What Drives Change in Ghana? A Political-Economy View of Economic Prospects
November 2005
Killick, Tony

President Clinton famously had the slogan, ‘It’s the economy, stupid’, hanging in the Oval Office as a constant reminder to himself of what his priority should be to keep the American electorate on his side. Giving priority to the population’s economic well-being is good advice to all democratic politicians but I will argue that, if we want to understand the half-century of the Ghanaian economy’s experiences, we should invert Clinton’s priority and pay most attention to institutions and politics. The mantra for economists trying to understand the performance of Ghana’s economy should be, “It’s the polity….”
In Ernest Aryeetey and Ravi Kanbur (editors), The Economy of Ghana: Analytical Perspectives on Stability, Growth and Poverty, James Currey, 2008.



Causes of low academic performance of primary school pupils in the Shama Sub-Metro of Shama Ahanta East Metropolitan Assembly (SAEMA) in Ghana
November 2005
Kafui Etsey

Shama Ahanta East Metropolitan Assembly (SAEMA) is one of the district assemblies in the Western Region of Ghana. It is one of the three metropolitan assemblies in the country. The other two are Accra-Tema and Kumasi. SAEMA is located about 210 kilometres along the coast, west of Accra and is divided into three sub-metro district councils which are Shama, Sekondi and Takoradi. The twin city of Sekondi-Takoradi is both the district capital and the regional capital. The Shama sub-metro is made up of Shama and Inchaban circuits. The poor academic performance of pupils in the Shama sub-metro of the Shama Ahanta Metropolis has been a concern for the metropolitan assembly over the past few years. The schools have shown poor performances in all public examinations and as one director puts it, ‘their BECE results have been appalling’...The purpose of this study therefore is to obtain evidence of the factors that are responsible for the poor academic performance of pupils in the Shama sub-metro...
Paper prepared for the Regional Conference on “Education in West Africa: Constraints and Opportunities” in Dakar, Senegal, November 1-2, 2005




Shared Growth in Ghana: Do migrant remittances have a role?
July 2005
Peter Quartey

The economy of Ghana has recorded modest net growth rates over the past decade. However, the current growth rates are inadequate to move the economy to a middle income status by 2015. Besides, not all benefited from the growth recorded so far and there is no doubt that the level of growth necessary to propel the country towards middle-income status cannot be achieved with the current levels of savings and investments within the domestic economy. The obvious issues are: how do we fill the savings gap and ensure shared growth? And how do we ensure that growth trickles down to the poor? The study believes that migrant remittances can serve the dual purpose; fill the savings gap, ensure shared growth and poverty reduction.
Presented at the International Conference on "Shared Growth in Africa," July 21-22, 2005, Accra, Ghana



Ghana: Recent Trends in Growth and Poverty Reduction
July 2005
Carlos B. Cavalcanti

The received wisdom about poverty and growth in Ghana is that poverty is mostly rural and that its economic structure has changed little since independence. As a result, the country’s poverty reduction record has been mixed, with growth benefiting primarily urban and export producing regions, leaving behind deep poverty in regions of subsistence agriculture, especially in Northern Ghana. Recent evidenced indicates, however, that poverty continuous declining, especially in rural areas, with slight increases in urban areas, albeit from much lower levels. This development reflects the fact that the structure of employment in the Ghanaian economy has changed quite significantly, with a shift away from agriculture and toward urban activities linked to trade and other services, as well as to manufacturing and construction. These labor market transitions are even more pronounced among younger workers, reflecting rapid urbanization and rising rates of educational attainment. While this virtuous cycle of urbanization has lead to progress in poverty reduction, sustaining the progress achieved so far will depend on maintaining the current economic expansion and raising the rate of job creation. The economic expansion of the last three years has been driven by the exceptional combination of record cocoa crops and historically high world market prices for cocoa and gold. Export growth, combined with rising workers remittances from abroad and continuous aid flows, have allowed the urban economy to expand and workers to move from rural to urban areas. This transition is still unfinished, however, as most of the new jobs are being created in the informal sector, meaning lower wages, greater job insecurity and lower productivity. Lower productivity, in turn, means less scope for raising real wages, and is a reminder that removing obstacles for the growth of private sector firms is essential for the sustainability of poverty reduction and the economic expansion. The rest of this paper elaborates on these points. It begins with a quick overview of changes in Ghana’s poverty profile. It considers next the transitions in the labor market, and how these reflect broader changes in the economy. It proceeds then to investigate the factors driving or hindering these labor market transitions. The last section concludes with a summary of the main findings.
Presented at the International Conference on "Shared Growth in Africa," July 21-22, 2005, Accra, Ghana



Organizational Culture, Performance and Public Sector Reforms in Africa: The Ghanaian Case
July 2005
Francis Owusu

Public sector reform programs implemented across Africa, including the World Bank’s “first” and ‘second” generation reforms, are based on the assumption that all public organizations are inefficient. This paper argues that this assumption is problematic and has had significant implications for policy. By failing to recognize that not all public organizations perform poorly, we ignore any potential lessons that could have been learnt from the experiences of organizations that have managed to perform effectively under the same social, political, economic and institutional environment. The study is based on the premise that the performance of an organization is influenced by the culture within the organization—which results from the ways in which organizations adapts to the external environment and the ways they ensure internal integration. Some organizations develop cultures that support, encourage and reward high performance; whereas others adopt a culture that perpetuates poor performance. Thus, public-sector reforms must be viewed as changing, or in some cases sustaining, organizational culture. Using Ghana as a case study, the study highlights lessons that can be learnt from studying differences in the performances of public organizations. It focuses on three-related issues. First, it addresses one major flaw of past reform policies—the assumption that all public organizations are ineffective. Second, it explores the relationship between organizational culture and performance. Third, it provides broad outlines of a comprehensive public sector reform strategy, centered on changing organizational cultures.
Presented at the International Conference on "Shared Growth in Africa," July 21-22, 2005, Accra, Ghana



Local Governance and Resource Allocation
July 2005
Sagre Bambangi and Al-hassan Seidu

An important function of District Assemblies in Ghana is to ensure that the benefits of growth are shared equitably and fairly. One way of achieving this is to promote efficiency in resource allocation at both individual and community levels. This paper utilizes the case study approach to assess efficiency of resource distribution in four Districts in the Northern and Upper East regions of Ghana with emphasis on infrastructure, micro-credit, human and information resources. The conclusion is that the Medium Term Development plan prepared within the framework of the themes of the Ghana Poverty Reduction Strategy (GPRS) is an important guiding document in resource allocation. The allocation of community facilities such as schools, health and administrative infrastructure have been found generally to conform to the plan in spite of occasional erratic influences and decisions of some personalities. However, in terms of resources that are allocated to individuals such as the Poverty Alleviation Fund (PAF) the guidelines are often circumvented. It is recommended that Government policy of zero tolerance for corruption needs to be demonstrated at the local level in terms of the disbursement of the PAF. Priority must be given to development considerations instead of partisan party loyalty in appointing DCEs in order to check politicisation of resource allocation. A serious consideration must be given to the full implementation of the sub-district structures to facilitate information dissemination. For the people to “feel the growth in their pockets” resource allocation at the local level needs to be closely monitored to ensure compliance with guidelines.
Presented at the International Conference on "Shared Growth in Africa," July 21-22, 2005, Accra, Ghana



Market Structure and Productivity Growth in Ghanaian Cocoa Production
June 2005
Andrew Zeitlin

This paper argues that market structure, and in particular the degree of competition among Licensed Buying Companies, is an important determinant of productivity in the Ghanaian cocoa industry. This issue is studied in the context of a two-year doubling of cocoa output at the national level. Evidence from microeconomic data confirms a significant increase among existing farmers, although this rate of in- crease is smaller than that observed at the national level. Analysis of production reveals an economically significant and statistically robust relationship between village-level Licensed Buying Company competition and the level and growth rate of total factor productivity.
Presented at the International Conference on "Shared Growth in Africa," July 21-22, 2005, Accra, Ghana



Shared Sectoral Growth: Evidence from Côte d’Ivoire, Ghana, and Zimbabwe
June 2005
Niels-Hugo Blunch and Dorte Verner

This paper examines agriculture, industry and service sector growth in Côte d’Ivoire, Ghana, and Zimbabwe over more than three decades. The analyses find at least one long-run sectoral relationship in each country. This indicates the existence of a large degree of interdependence in long-run sectoral growth, implying that the sectors “grow together” or, similarly, that there are externalities or spillovers between sectors. This also provides evidence against the basic dual economy model, which implies that a long-run relation cannot exist between agricultural and industrial output. The impulse response and short-run sectoral growth analyses support these results, as both imply the existence of a positive link between growth in industry and growth in agriculture. Policy implications are also discussed; these include directing more attention towards the interdependencies in sectoral growth broadly defined. In particular, our findings have implications for the design of education and health programs, as well. This improved understanding of intersectoral dynamics at all levels may facilitate policy implementation aimed at increasing economic growth—and thereby ultimately improving peoples’ livelihoods—in Africa.
Presented at the International Conference on "Shared Growth in Africa," July 21-22, 2005, Accra, Ghana



Ghana Census-Based Poverty Map: District and Sub-District level Results
May 2005
Coulombe, Harold

This paper documents the construction and presents the main results of a Ghanaian poverty map based on the GLSS4 survey and the Census 2000. The methodology takes advantages of detailed information found in the survey and the exhaustive coverage of the census. It permits the calculation of poverty indicators at a very low level of desegregation; sub-district in the case of Ghana. In the current paper district level poverty figures are presented. Council level estimates are also available.
In Ernest Aryeetey and Ravi Kanbur (editors), The Economy of Ghana: Analytical Perspectives on Stability, Growth and Poverty, James Currey, 2008.



Operationalizing Pro-Poor Growth: A Country Case Study of Ghana
October 2004
Andrew McKay and Ernest Aryeetey

This paper is prepared as part of the multi-donor Operationalising Pro-Poor Growth study, which is focusing on aiming to provide advice to governments on how to facilitate the involvement of poor people in the growth process. It is prepared as one of 14 case studies prepared as part of this project, and following a common outline structure and analytic approach. The case study papers are prepared to assess country-level evidence on the relationships between growth performance and trends in poverty, and on how this can be enhanced. This implies therefore an analysis which combines macro and sectoral analysis of the determinants of growth and its distributional pattern, with more micro-level poverty analysis. While much of the analysis investigating the links between pat-terns of growth and changes in poverty is historical, assessing past evidence, there is also an important forward looking component on how poverty-reducing growth can be initiated, sustained or enhanced….
Presented at the International Conference on "Shared Growth in Africa," July 21-22, 2005, Accra, Ghana



Prospects and Challenges of Agricultural Technology Market Linkage under Liberalization in Ghana: Evidence from a micro-data
October 2004
Tsegaye Yilma, Ernst Berg and Thomas Berger

There is a general consensus that bad economic policies, among other factors, are to blame for the poor performance of economies in sub Saharan African (SSA). However, there is no similar consensus on the effect of economic reforms on poverty alleviation, a primary goal of any economy in the region. This paper looked into the effect of macro-economic reforms, particularly the removal of subsidized agricultural credit for irrigator farmers in Ghana, a pioneering reform country in SSA. A theoretical model of this scenario is constructed in which it is shown that, under multiple market imperfection, farmers resort to alternative financial sources to finance irrigation. Particularly in the presence of off-farm alternative, farmers divide their labor resource between irrigation farming and off-farm employment. The long term implication of a predominant dependence on off-farm income for financing irrigation farming will be an induced increase in family size. This model is subsequently tested and validated with a household data collected from northern Ghana. Household labor endowment and off-farm participation have a positive and significant effect on household irrigation decisions. This implies that, irrigation and off-farm employment are complimentary activities, which indicates a possible induced family size increase.

Presented at the DPRU-TIPS-Cornell University Forum on "African Development and Poverty Reduction: The Macro-Micro Linkage," October 13-15, 2004, Cape Town, South Africa



Understanding Poverty in Ghana: Risk and Vulnerability
July 2004
Appiah-Kubi, Kojo, Abena D. Oduro, and Bernardin Senadza

Poverty, as a reflection of material, social or rights deprivation, is of concern in its own right, hence its reduction has been the focus of economic policy in both developed and developing countries. However, as pointed out by Gibson (2001), people may, in a given time period, be poor either because their mean quantitative proxy indicator for poverty such as income, consumption expenditure or calories falls below the national average (or poverty line) or because they have suffered a temporary shortfall in consumption or income. In other words households or persons may be poor at a point in time either due to intertemporal variability in consumption or income, which is considered as “transient”, or because of the persistence of income or consumption expenditure below the poverty line, i.e. “chronic poverty” (Jalan and Ravallion, 1998). Therefore, for effective poverty reduction programmes, it is important to know not only those who are currently poor but also those who are vulnerable to poverty.
In Ernest Aryeetey and Ravi Kanbur (editors), The Economy of Ghana: Analytical Perspectives on Stability, Growth and Poverty, James Currey, 2008.



The Evolution of Welfare in Ghana: A Rural-Urban Perspective
July 2004
Louis Boakye-Yiadom

Welfare patterns in Ghana are characterised by widespread rural-urban disparities, with the welfare of rural residents lagging behind that of their urban counterparts. This paper argues that Ghana’s rural-urban welfare gap is influenced by the concentration – in urban areas – of business and industrial activity, and is sustained by the resultant inequalities in education, access to healthcare, and basic amenities. Given the pervasiveness and self-perpetuating nature of the disparities, the paper calls for a major policy initiative to address the imbalance.
Presented at the ISSER-University of Ghana-Cornell University International Conference on "Ghana at the Half Century," July 18-20, 2004, Accra, Ghana



Effects of Exchange Rate Volatility and Changes in Macroeconomic Fundamentals on Economic Growth in Ghana
July 2004
Stephen Kyereme

This paper examines the determinants of per person real output growth (a measure of economic growth), exchange rate volatility, and price inflation—and their interactions and implications for economic development—using vector autoregression models. The roles of money and interest rates in price and output determination in Ghana are also explored. Using the Johansen cointegration procedure, tests are done to find out if long run relationships exist between pairs of the above variables. Results suggest: money as the key determinant of inflation; the exchange rate as the main determinant of output; and the exchange rate itself and price as the main determinants of the exchange rate. Interest rate shocks explain interest rates and money. Cointegration tests suggest: (a) a significant long run relationship between real output growth and the exchange rate; (b) a significant long run relationship between price inflation and the exchange rate; and (c) an insignificant long run relationship between the real interest rate and the exchange rate. These results reinforce the vector autoregression results discussed above. Policy makers, researchers, and future research may find insights from this study useful.
In Ernest Aryeetey and Ravi Kanbur (editors), The Economy of Ghana: Analytical Perspectives on Stability, Growth and Poverty, James Currey, 2008.
Presented at the ISSER-University of Ghana-Cornell University International Conference on "Ghana at the Half Century," July 18-20, 2004, Accra, Ghana



A General Equilibrium Analysis of the Impact of Inward FDI on Ghana: The Role of Complementary Policies
July 2004
Lawrence Arbenser

The need for external capital (FDI) inflow to finance the current account deficit of developing countries cannot be over-emphasized. Foreign direct investment takes predominance over other types of capital inflow into developing countries. How would an increase in FDI and a reduction in import tariff levels in isolation affect household welfare and other macroeconomic indicators? How would the concurrent application of the two enhance expected impact? This paper explores the above questions by using a Computable General Equilbrium (CGE) model for Ghana, implemented in the General Algebraic Modeling System (GAMS) to carry out specific counterfactual simulations. This paper concludes that the primary benefit of an increase in FDI inflow for a developing economy is the increase in current consumption. It also establishes that policies which ensure increase in FDI flow and reduce tariff levels are complementary policies that enhance household welfare. It also emphasizes that the two policies will have different impact on macroeconomic indicators, inter alia exchange rate, export, import and trade deficit.
Presented at the ISSER-University of Ghana-Cornell University International Conference on "Ghana at the Half Century," July 18-20, 2004, Accra, Ghana



Terms and Access to Credit: Perceptions of SME/Entrepreneurs in Ghana
July 2004
Kwadwo Ansah Ofei

This research reports on the impact of financial sector liberalization program on the access to funding by Small and Medium Enterprises (SME’s) in seven regions in Ghana. Especially, it examines the extent to which differences in the development of the seven regions can cause access to funding. Small and Medium Enterprises (SME’s) in Ghana. in constitute a greater percentage of the economy of Ghana. There are, however, several constraints to the development of SME’s. Especially, the lack of access to resources and financial markets (Aryeetey et al 1994). Other constraints to SME development include difficulty in finding skilled labour to employ. There is also a problem of having access to modern technology. Many firms use old machinery, and have problems with finding replacements parts to purchase (Andrea 1981)
Presented at the ISSER-University of Ghana-Cornell University International Conference on "Ghana at the Half Century," July 18-20, 2004, Accra, Ghana



Coping with Performance Below Expectations
July 2004
Blair Rourke

The weak economic performance of Ghana since independence has been a source of much disappointment. A similar situation applies as well to most other African countries, and for many, the performance has been even worse. Much attention has been given both to failed government policies and to the failure of international assistance. It will be argued that one factor that is frequently not given sufficient attention in the discussion of the growth in the economy of Ghana is the extent to which the 1950s, the period during which Ghana obtained its independence, was an abnormally favorable period for Ghana and for most other primary commodity producing countries. The focus of the argument here is somewhat different from that usually advanced in studies showing the critical importance of the terms of trade to Ghana. It is that the favorable external environment for Ghana in the 1950s was the result of rather unique events, and the degree to which they were unique was not fully appreciated at the time and for many years thereafter. This experience of Ghana in the early postindependence period raises more general questions as to how to differentiate between permanent and transitory events, and further, when major errors occur, questions as to how the situation can be rectified.
Presented at the ISSER-University of Ghana-Cornell University International Conference on "Ghana at the Half Century," July 18-20, 2004, Accra, Ghana



Real Exchange Rate Response to Capital Inflows: A Dynamic Analysis for Growth
July 2004
Oliver Morrissey, Tim Lloyd and Maxwell Opoku-Afari

One of the most challenging problems in developing countries such as Ghana is exchange rate management, that is, ‘getting the exchange rate right’ especially in the context of exchange rate misalignment. The major research and policy question is what constitutes the equilibrium real exchange rate (ERER) and how can it be measured? Acknowledging the importance of fundamentals in determining the equilibrium real exchange rate, the paper concentrates on the effects of capital inflows (by decomposing capital inflows into official inflows, “permanent” inflows and “non-permanent” inflows). Vector Autoregressive (VAR) techniques are used to model the long-run equilibrium real exchange rate in Ghana, and based on a multivariate orthogonal decomposition technique, the equilibrium steady state path is identified which is used in estimating misalignments. As predicted by the Dutch Disease theory, results indicate that capital inflows tend to appreciate the real exchange rate in the long-run. Capital inflows is the only variable generating real appreciation in the long-run; technology change, trade (exports) and terms of trade all tend to depreciate the real exchange rate. The only variable that has a significant (depreciating) effect on the real exchange rate in the short-run is trade, implying that changes in exports are the major driver of exchange rate misalignment. It is also shown that the real exchange rate is slow to adjust back to equilibrium, implying policy ineffectiveness or inflexibility.
Presented at the ISSER-University of Ghana-Cornell University International Conference on "Ghana at the Half Century," July 18-20, 2004, Accra, Ghana



Persistent Public Sector Deficits and Macroeconomic Instability in Ghana
September 2004
Curtis E. Youngblood and David L. Franklin

Over the decade of the 1990s Ghana was considered an example among African countries regarding the pace and extent of its economic reforms affecting its trade regime, its financial sector, and the conduct of its fiscal and monetary policy (Kapur et al., 1991). This reputation was earned in the latter half of the 1980s when Ghana’s government instituted a series of policy measures to rescue its economy from the depths of its most severe crisis in the post-colonial period. This program, the Economic Recovery Program (ERP), placed Ghana on a path of modest economic growth: from a per capita GDP of $309 in 1983, per capita income grew at an average rate of 1.8% per year to $371 in 1993. In spite of this early promise and the good reputation it achieved with the international financial institutions, international donors and its own private enterprise sector, Ghana’s economic growth has continued to be moderate. Per capita GDP in 2000 was $411, so that per capita incomes grew at only 1.5% per year from 1993 through 2000. At this rate, incomes will double in 50 years. This is a far cry from the ambitious growth rates envisioned in official growth plans such as Vision 2020, which was predicated on per capita growth rates of 5%-7% per annum. Yet, it is perplexing to most observers that in March 2001 the recently elected government of the New Patriotic Party (NPP) sought relief under the Highly Indebted Poor Countries (HIPC) initiative, as it dealt with the aftermath of a massive currency crisis.
In Ernest Aryeetey and Ravi Kanbur (editors), The Economy of Ghana: Analytical Perspectives on Stability, Growth and Poverty, James Currey, 2008.
Presented at the ISSER-University of Ghana-Cornell University International Conference on "Ghana at the Half Century," July 18-20, 2004, Accra, Ghana



Economic Growth in Ghana: 1960-2000
July 2004
Ernest Aryeetey and Augustin K. Fosu

It was fairly common in the 1980s and early 90s to read commendations of Ghana’s economic growth achievements. Leechor (1994) described Ghana as a frontrunner in the economic reform process, and the Bretton Woods institutions regularly put Ghana forward as a showcase of economic success in Africa. But this occurred at a time when many Ghanaians showed little appreciation of that growth achievement (Aryeetey and Tarp 2000). The continuing fragility of the economy and the significant social costs of adjustment made it difficult to appreciate economic growth in a period of reforms. While there is no doubt about the fact that the economic growth record of the last two decades, following reforms, differed from that of the first two decades in terms of consistency, it is also clear that the factors behind the growth experiences of shorter periods in-between show remarkable similarity. Whenever there has been considerable capital injection into the economy, this has been followed by significant growth. It is the difficulty in making those injections consistently in the absence of structural change that has left the economy still fragile after four decades of independence.
In Ernest Aryeetey and Ravi Kanbur (editors), The Economy of Ghana: Analytical Perspectives on Stability, Growth and Poverty, James Currey, 2008.
Presented at the ISSER-University of Ghana-Cornell University International Conference on "Ghana at the Half Century," July 18-20, 2004, Accra, Ghana



Poverty Reduction Efforts in Ghana: The Skill Development Option
July 2004
George Botchie and William Ahadzie

Ghana, like many developing countries needs to improve economy-wide labour productivity in order to achieve a competitive edge in the rapidly changing economic and technology-driven world. But an equally significant driver of improved labour productivity is the effort to reduce endemic poverty in a country that has a low technological base. Flexibility and productivity of the labour force are dependent on the competent skilled workers. Generally, skilled workers and technicians enhance the quality and efficiency of product development, production, and maintenance, and they supervise and train workers with lesser skills (World Bank 1998 13). For the poor, labour in its crudest form, is a key asset and adding value to that asset could offer a route out of poverty. But the stock of skills required by the poor goes beyond technical and entrepreneurial abilities (ILO InFocus Programme 2004). They need skills that make them confident and capable of exploring and trying new income-earning opportunities within the labour market. Among the critical competencies are skills such as numeracy and literacy, social and communication skills, problem-solving and decision-making, negotiation skills, learning and training to promote social inclusion including understanding of social rights, “citizenship skills”, self organisation.
Presented at the ISSER-University of Ghana-Cornell University International Conference on "Ghana at the Half Century," July 18-20, 2004, Accra, Ghana



Decentralization and Poverty Reduction
July 2004
Felix A. Asante and Joseph R. A. Ayee

This paper concentrates on one of the most important reasons behind the implementation of decentralization programmes in sub-Saharan Africa, that is, the capacity of decentralized governments because of their closeness both institutionally and spatially to citizens in the rural areas who are more responsive to the needs of the poor than the central government and thus are more likely to formulate and implement pro-poor policies and programmes. Using the Ghanaian experience of decentralization, which started with the creation of 110 decentralized governments called District Assemblies in 1988/89, the paper examines the impact of decentralization on poverty reduction.
In Ernest Aryeetey and Ravi Kanbur (editors), The Economy of Ghana: Analytical Perspectives on Stability, Growth and Poverty, James Currey, 2008.
Presented at the ISSER-University of Ghana-Cornell University International Conference on "Ghana at the Half Century," July 18-20, 2004, Accra, Ghana



Ghana’s Exchange Rate Reform and its impact on Balance of Trade
July 2004
Frank W. Agbola

Since the breakdown of Bretton Wood Accord in 1973, and the advent of floating exchange rates, there has been renewed interest about the effect of devaluation on the trade balance of both developed and developing countries. This paper examines the impact of devaluation on trade balance of Ghana. Annual data spanning the period 1970 and 2002 were employed in the analyses. The Johansen MLE multivariate co-integration procedure reveals that Ghana’s trade balance and key determinants are co-integrated, and thus share a long-run equilibrium relationship. The Stock-Watson dynamic OLS model (DOLS), which is superior to a number of alternative estimators, finds empirical evidence of significant long run relationship between Ghana’s trade balance and real domestic and foreign income, domestic and foreign interest rates and exchange rates. The empirical result suggests that devaluation does not improve the trade balance of Ghana in the long run. The response in trade balance to movements in the exchange rate appears to be characterised by an M-curve phenomenon. The policy implications of the results are discussed.
In Ernest Aryeetey and Ravi Kanbur (editors), The Economy of Ghana: Analytical Perspectives on Stability, Growth and Poverty, James Currey, 2008.
Presented at the ISSER-University of Ghana-Cornell University International Conference on "Ghana at the Half Century," July 18-20, 2004, Accra, Ghana



Rural and Micro Finance Regulation in Ghana: Implications for Development of the Industry
September 2004
William F. Steel and David O. Andah

This paper assesses how the policy, legal and regulatory framework has affected — and been influenced by — the development of rural and micro finance institutions (RMFIs) in Ghana, especially in terms of the range of institutions and products available, their financial performance and outreach. The potential of microfinance to reach large numbers of the poor is well understood (Robinson 2001). Questions for regulation are the extent to which a flexible regulatory environment can encourage innovation and a diversity of RMFIs and products serving different market niches not reached by commercial banks, and at what point special legislation may be needed, whether to facilitate commercialization and sustainability of the rural and micro finance (RMF) industry or to protect deposits and ensure the stability of the financial system. Ghana is particularly interesting because its tiered system of different laws and regulations for different types of institutions has evolved largely in response to local conditions and because so many of its institutions are savings-based. The resulting system resembles the tiered approach recommended by the World Bank’s 1999 study of microfinance regulation (Van Greuning et al.) and more recently adopted by Uganda.2 While Ghana’s approach has fostered a wide range of both formal and informal RMFIs, it has not as yet been so successful in achieving strong financial performance, significant scale, and true commercialization of microfinance.
In Ernest Aryeetey and Ravi Kanbur (editors), The Economy of Ghana: Analytical Perspectives on Stability, Growth and Poverty, James Currey, 2008.
Presented at the ISSER-University of Ghana-Cornell University International Conference on "Ghana at the Half Century," July 18-20, 2004, Accra, Ghana



A Small Macroeconometric Model of Trade and Inflation in Ghana
July 2004
Samuel Donyina Ameyaw and Philip Abradu-Otoo

This paper uses a conventional macroeconometric model to empirically investigate the effects of credit tightening and currency depreciation on trade and inflation in Ghana. Our main findings are as follows. First, the results corroborate the view of the International Monetary Fund that both depreciation and credit restraint are effective in addressing the balance of payments issues facing developing economies, such as Ghana. Second, depreciation of the domestic currency is unfavourable to the cause of curbing inflation in Ghana. It rather leads to price increases and could lead to spiraling inflation through the agitation of higher wages by employees. Third, depreciation of the domestic official exchange rate leads to a decline in the parallel market exchange rate premium, while increases in money supply causes the parallel market exchange rate premium to increase.
Presented at the ISSER-University of Ghana-Cornell University International Conference on "Ghana at the Half Century," July 18-20, 2004, Accra, Ghana



From Independence to Economic Reform: Rural Poverty in Ghana from 1967-1997
July 2004
Markus Goldstein and Rikhil Bhavnani

Estimates of poverty and inequality are constructed more accurately from household survey rather than national accounts data, since growth in the latter per force demonstrates that any growth leads to poverty reduction. Household surveys, however, were only systematically conducted from the 1980s onwards, at the prompting of the academic community and the World Bank. Most examinations of poverty reduction and inequality therefore limit themselves to trends since the 1980s, failing to take a sufficiently long duree of their evolution. Similarly, assessments of structural adjustment programs are usually conducted at the macro-level, with before-after or plan-outcome analysis, leaving aside examinations of microeconomic changes, partly due to the absence of such data. The ensuing discussions on poverty, inequality and the efficacy of structural adjustment programs (and macroeconomic policy more generally) thus often form a flimsy basis for national and international policy making, leading many to call for radical changes in data gathering and dissemination practices.
Presented at the ISSER-University of Ghana-Cornell University International Conference on "Ghana at the Half Century," July 18-20, 2004, Accra, Ghana



Does Inflation in Ghana Hit the Poor Harder?
April 2005
Andy McKay and Nii K. Sowa

One of the defining characteristics of the Ghanaian macroeconomy over the past 40 years has been its high, and often variable, rates of inflation. Inflation was particularly high and variable in the politically turbulent 1970s and early 1980s, but has persisted throughout the gradual economic recovery since 1983. Though inflation has been lower and less variable in the latter period, it still remains high in absolute terms and by comparison with many other countries...This paper focuses on the question of whether the inflation rate for the basket of purchases of the poor is higher than for the population as a whole.
In Ernest Aryeetey and Ravi Kanbur (editors), The Economy of Ghana: Analytical Perspectives on Stability, Growth and Poverty, James Currey, 2008.
Presented at the ISSER-University of Ghana-Cornell University International Conference on "Ghana at the Half Century," July 18-20, 2004, Accra, Ghana



Household Savings in Ghana: Does Policy Matter?
July 2004
Peter Quartey and Theresa Blankson

The level of financial savings in recent years has been low by African standard and although various monetary policies have been pursued in Ghana to liberalize the financial sector, the level of savings has not increased substantially to accelerate the economy towards the growth path. Ironically, the few studies that have examined savings behaviour in Ghana have focused on aggregate savings (national or private savings) which does not sometimes reveal enough on household savings. Secondly, these studies have not examined the macro-micro inter-relationship between household savings and macro-financial policy. This study mainly aims to examine this relationship using the Ghana Living Standards Survey (GLSS) Waves III and IV. The paper found that macrofinancial sector policies pursued between 1991/92 and 1998/99 did not have appreciable effect on household savings. Secondly, children and the aged on average had higher savings balances than the working population, contrary to the life cycle hypothesis.
In Ernest Aryeetey and Ravi Kanbur (editors), The Economy of Ghana: Analytical Perspectives on Stability, Growth and Poverty, James Currey, 2008.
Presented at the ISSER-University of Ghana-Cornell University International Conference on "Ghana at the Half Century," July 18-20, 2004, Accra, Ghana



Policy Dynamics, Trends in Domestic Fish Production & Implications for Food Security in Ghana
July 2004
A. Wayo Seini, V. K. Nyanteng and A. Asantewah Ahene

The fishing industry in Ghana started as an artisanal fishery with very simple and low efficient gears and methods operating in very near coastal waters, lagoons, estuaries and rivers. Through government and private efforts to promote production, the fishing industry continued to improve over the years with the development of new gears and methods that had been more efficient than the previous ones. Through government schemes, the use of outboard motors on canoes, introduced in 1959, was very successful and went a long way to create a modern sub-sector of the canoe fisheries. These schemes, particularly the charter party scheme (a hire purchase scheme), also encouraged fishermen to purchase larger fishing boats and gear which they paid for over a period of four years at very low interest rates (Lawson and Kwei, 1974). This paper examines major policy regimes since Ghana’s independence and relates them to trends in domestic fish production. Domestic production is then linked to the implications for food security. There is no doubt that fish is an important commodity in the country’s food security, particularly when the latter is defined beyond availability and accessibility to encompass the nutritional content of a meal that is required to provide a balanced diet and to ensure a minimum daily intake of 2,300 calories. Where food consumption is not balanced from the standpoint of nutrition, some diseases and improper physical developments emerge, such as stunting, underweight and wasting in children, particularly, under-5 years of age. Fish is consumed by many households and among all income groups everywhere in Ghana, largely to supply protein requirements in the diet.
Presented at the ISSER-University of Ghana-Cornell University International Conference on "Ghana at the Half Century," July 18-20, 2004, Accra, Ghana



Budget Implementation and Poverty Reduction in Ghana
July 2004
Anthony Tsekpo and Charles D. Jebuni

In a poor country, the government plays a key role in poverty reduction. A critical instrument available to government in the pursuit of the poverty reduction objective is fiscal policy – budgetary allocation and disbursement of budgetary resources. In recent times, the Government of Ghana adopted the Ghana Poverty Reduction Strategy (GPRS), which serves as the overall framework document for medium to long-term development policy in Ghana. Budget and macroeconomic policies are therefore, to be derived from the GPRS. The fact that the GPRS has poverty reduction as its focus suggests that resource allocation within the context of the budget will recognise expenditures that are more likely to have significant impact on the poor or sectors and activities where the poor are expected to benefit most.
In Ernest Aryeetey and Ravi Kanbur (editors), The Economy of Ghana: Analytical Perspectives on Stability, Growth and Poverty, James Currey, 2008.
Presented at the ISSER-University of Ghana-Cornell University International Conference on "Ghana at the Half Century," July 18-20, 2004, Accra, Ghana



Mitigating the Impact of HIV II
July 2004
John K. Anarfi and Ernest N. Appiah

Since the first clinical evidence of HIV/AIDS was reported in 1981, the epidemic continues to escalate at an alarming rate and has now become a full-blown developmental crisis in the world. Africa is the most affected continent and at the end of the year 2002 she had 28.1 million of the world’s estimated 42 million people living with HIV. Since the beginning of the epidemic and by the end of 2001 a cumulative 19 million Africans had already died of AIDS. Although just 10% of the world’s youth live in Sub-Saharan Africa, the region contained almost three-quarters of all youth living with HIV/AIDS in 2001 – a total of 8.6 million. That is certainly a threat to the future generation of Africa and calls for refocusing of efforts on strategies that have the potential of registering a strong impact in efforts at reducing further spread of the disease. This paper identifies education as a strategy that can be used to mitigate the impact of HIV/AIDS in Ghana. It focuses on both formal school education and general education on HIV/AIDS.
Presented at the ISSER-University of Ghana-Cornell University International Conference on "Ghana at the Half Century," July 18-20, 2004, Accra, Ghana



Export Performance and Investment Behaviour of Firms in Ghana
July 2004
Susanna Wolf and Daniel Bruce Sarpong

A strong relationship between export performance and investment behaviour at the firm level is expected to complement market access in diversifying Ghana’s exports. A 2003 survey of 100 enterprises in Ghana is used to analyse the factors that influence the investment and exporting behaviour of firms using a simultaneous equation model to allow for the endogeneity of investment and exporting. In addition the different factors that influence the investment and export decisions in different sectors are investigated. However, no significant positive relationship between exporting and investment could be found. There seems rather to be a negative association which might be explained by constraints in the access to capital. On the other hand there are several factors that work in the same direction, for example, younger firms, larger firms and more efficient firms are more likely to invest and more likely to export.
In Ernest Aryeetey and Ravi Kanbur (editors), The Economy of Ghana: Analytical Perspectives on Stability, Growth and Poverty, James Currey, 2008.
Presented at the ISSER-University of Ghana-Cornell University International Conference on "Ghana at the Half Century," July 18-20, 2004, Accra, Ghana



Adult Literacy Programmes in Ghana: An Evaluation
June 2004
Niels-Hugo Blunch and Claus C. Pörtner

This paper examines the effect of adult literacy program participation on household consumption in Ghana. We find that in most cases there is no significant effect on consumption from participation after allowing for self-selection into the program. For households where no adults have completed any formal education there is, however, a substantial positive and statistically significant effect on household consumption, pointing towards the potential importance of adult literacy programs for the parts of the population which have not participated in the formal education system. Possible explanations for why adult literacy program participation does not seem to significantly affect households where some formal education has been attained are explored, as well.
Presented at the ISSER-University of Ghana-Cornell University International Conference on "Ghana at the Half Century," July 18-20, 2004, Accra, Ghana



Technical Efficiency in Ghanaian Secondary Education
April 2005
Kwabena Gyimah-Brempong and Elizabeth N. Appiah

This paper uses district-level panel data and a stochastic frontier production function to investigate the existence of, and the correlates of inefficiency in the production of secondary education in Ghana. Using the proportion of students passing the West African Examination Council’s Certificate examination, we find relatively large indices of technical inefficiency in the production of education in Ghana. These technical inefficiencies vary by subject matter and are higher at the Junior Secondary School level than at the Secondary School level. Furthermore, we find large regional differences in technical inefficiencies we estimate in this paper. Technical inefficiency, we find, also varies by subject; there tends to be large inefficiencies in the sciences and mathematics than in English. We find that average per student household expenditure on education, parent’s education, and the number of siblings are highly correlated with technical inefficiencies in the production of secondary education in Ghana. The correlation between these family inputs and technical ineffi- ciency is much stronger at the Senior Secondary School level than at the Junior Secondary School level. We also find that the education production function is neither of the Cobb-Douglas functional form nor constant returns to scale technology. Our results point to the importance of both school and family inputs in the production of cognitive abilities in Ghanaian secondary schools.
In Ernest Aryeetey and Ravi Kanbur (editors), The Economy of Ghana: Analytical Perspectives on Stability, Growth and Poverty, James Currey, 2008.
Presented at the ISSER-University of Ghana-Cornell University International Conference on "Ghana at the Half Century," July 18-20, 2004, Accra, Ghana



The North-South Divide and the Disappearing Middle Class: An Analysis of Spacial Inequality and Polarization in Ghana
May 2004
Jacqueline Vanderpuye-Orgle

This paper assesses trends in spatial inequality and polarization in Ghana over the period of economic reform. It contributes to the existing literature in three ways. First, it focuses on the spatial dynamics of inequality in Ghana. Secondly, it introduces the concept of polarization to the income distribution-welfare dialogue in Ghana. Finally, it proposes an index for measuring the share of spatial variation in changes in total inequality, as well as determining which spatial dimension primarily affects the variation in total inequality. The results establish that the Ghanaian population is clustered and that polarization is increasing in Ghana. The differences within-group specific means are considerably larger than the between-group components in explaining static levels of interpersonal inequality. However, changes in the levels of inequality are principally driven by changes in the between-group, i.e. the spatial, component of inequality. This suggests that inequality in Ghana may be assuaged by formulating regional policies directed at reducing down-side fluctuations in spatial inequality.
Presented at the ISSER-University of Ghana-Cornell University International Conference on "Ghana at the Half Century," July 18-20, 2004, Accra, Ghana



Healthcare Provision and Self Medication in Ghana
October 2004
G. J. M. van den Boom, N. N. N. Nsowah-Nuamah and G. B. Overbosch

Self-medication is predominant in Ghana, where one out of four lives outside a 15 km radius of a doctor. The cost of visiting a doctor is almost $10, one third of monthly per capita expense, as compared to $1.5 for self-medication. Simulated utilization patterns indicate that higher densities (doctors within 15 km) and more insurance (flat rate tax covering half of the health expense) could raise demand for doctors by 15-20%. The poor though continue to rely on self-medication. Medicines that are affordable and of certified quality could thus play a key supplementary role in health sector development.
In Ernest Aryeetey and Ravi Kanbur (editors), The Economy of Ghana: Analytical Perspectives on Stability, Growth and Poverty, James Currey, 2008.
Presented at the ISSER-University of Ghana-Cornell University International Conference on "Ghana at the Half Century," July 18-20, 2004, Accra, Ghana



Survival and Success Among African Manufacturing Firms
February 2004
Alan Harding, Måns Söderbom and Francis Teal

Recent reforms in most African economies of their trading and exchange rate regimes have eliminated much of the protection which previously limited competition. Despite these reforms, African manufacturing firms remain unsuccessful, particularly in international export markets. In this paper we consider the roles of learning, competition and market imperfections in determining three aspects of firm performance, namely firm exit, firm growth and productivity growth. We use a pooled panel data set of firms in Ghana, Kenya and Tanzania that spans a period of five years. We find that the main determinant of exit is firm size, with small firms having much higher exit rates than large ones. Productivity impacts on firm survival among large firms, but not among small firms. Reasons for this result are discussed. We find evidence that, among surviving firms, old firms grow slower than young firms, which is interpreted as evidence consistent with market constraints limiting growth of firms in Africa. We find no evidence that larger firms have faster rates of productivity or input growth, or are more efficient in the sense of benefiting from scale economies. We also find that competitive pressure enhances productivity growth. Given that one of the objectives of the reform programmes implemented in all three countries was to stimulate higher efficiency levels, this finding shows that one aspect of the reform programme has been successful.
Presented at the ISSER-University of Ghana-Cornell University International Conference on "Ghana at the Half Century," July 18-20, 2004, Accra, Ghana



Challenges Facing Potential Investors in the Pineapple Industry in Ghana
February 2004
Yeboah, Godfred

The project involved studying the economics of pineapple production and marketing in Ghana. This was undertaken as part of two studies: “The Farmapine Model: A Cooperative Marketing Strategy and Market Based Development Approach.” and “Profitability and Risk Analysis: The Case of Ghana’s Pineapple Exports.” The project falls under SAGA’s general objectives and in particular under thematic area of ‘risks, vulnerability and poverty dynamics’. The study also has policy implications especially in terms of poverty alleviation and sustainable economic development.
Final Report for SAGA Competitive Research Grants Program



Maternal Literacy and Numeracy Skills and Child Health in Ghana
May 2005
Niels-Hugo Blunch

This paper examines the impact of maternal literacy and numeracy skills and schooling on the production of children’s health in Ghana. The analysis considers child health inputs, including pre- and post-natal care and vaccinations, and child health outputs, including illnesses and mortality. Previous studies of the determinants of child health have mostly been limited to investigating the impact of maternal schooling only and, as a consequence, largely have not considered skills, including literacy and numeracy skills and health knowledge, and also have ignored alternative routes to acquiring skills, such as adult literacy programs. Analyzing a recent household survey for Ghana, this paper addresses both of these issues. Preliminary results for a specification where all regressors are treated as predetermined indicate that skills are largely not important once education is controlled for but at the same time also indicate a positive association between adult literacy course participation and child health. The latter points towards the potentially important role of adult literacy programs in promoting child health by the acquisition of health knowledge by participants in these programs, which is something that has previously received little to no attention in the economics literature.
In Ernest Aryeetey and Ravi Kanbur (editors), The Economy of Ghana: Analytical Perspectives on Stability, Growth and Poverty, James Currey, 2008.
Presented at the ISSER-University of Ghana-Cornell University International Conference on "Ghana at the Half Century," July 18-20, 2004, Accra, Ghana



Household Asset Choice Among the Rural Poor in Ghana
January 2004
Ernest Aryeetey

It is generally well known that Ghanaian households have been generally low savers in the last four decades (Aryeetey 1997). But the fact that saving is low does not mean households have no assets (de Janvry et.al 1991). This raises considerable interest in the issue of what determines how households allocate their portfolio of assets. It is certainly important to examine the diversity in asset choices rural households make. A diverse portfolio of assets is not only critical for households to cope with unexpected shocks, but can free access to a range of consumption smoothing options that are vital for them to maximize utility over time. Diversity in asset choice is also important in order to allow households to manage risk in any one period. These attributes are especially important in developing countries where the lack of sufficient access to consumption smoothing mechanisms can perpetuate and worsen poverty. A household that is constrained in its access to credit or other assets may not be able to survive a negative shock. In practice, many households do survive, but at the cost of adopting an extremely risk averse production strategy. In many rural areas, for example, this strategy might be reflected in the sacrifice of expected return as farmers choose safer, lower yield crops. This perpetuates the cycle of poverty and hampers economic growth as the credit and/or other constraints push farmers to a sub-optimal path1.
Presented at the ISSER-University of Ghana-Cornell University International Conference on "Ghana at the Half Century," July 18-20, 2004, Accra, Ghana



Production Changes in Ghana Cocoa Farming Households Under Market Reforms
October 2003
Francis Teal and Marcella Vigneri

The Ghana cocoa market has been extensively liberalised over the period since the mid 1980s. Three issues have been prominent in research on agricultural supply response to liberalisation. The first has been the size of the supply elasticity, the second the response to reduced subsidies on inputs, the third whether innovation will occur. In this paper we investigate these three issues by estimating a production function for cocoa in Ghana drawing on two household surveys covering the period from 1991 to 1998. The estimated production function allows identifying the factors underlying the change in output. It is shown that for most regions the whole rise in cocoa production occurring over the period, of about 6 per cent per household, was accounted for by a rise in land and non-labour inputs. The data is consistent with a constant returns to scale technology in which total factor productivity was unchanged in almost all regions. There were offsetting changes in factor use: the labour to land ratio fell while the non-labour to land ratio rose. Thus the analysis of the micro data shows that, contrary to much of the discussion of the effects of trade reform, the contribution of non-labour inputs to cocoa production has increased both relative to land and, very substantially, relative to labour. The reform period has seen a rise in the ratio of both land to labour and of non-labour input to labour which have increased labour productivity. Reform has not led to innovation in techniques which raise total factor productivity.
Presented at the ISSER-University of Ghana-Cornell University International Conference on "Ghana at the Half Century," July 18-20, 2004, Accra, Ghana



Selective Poverty Reduction in a Slow Growth Environment: Ghana in the 1990s
September 2003
Harold Coulombe and Andy McKay

Ghana is regarded as having achieved a relatively good record of poverty reduction in the first years of its Economic Recovery Programme initiated in 1983. This paper addresses the record of poverty reduction over the 1990s, when Ghana’s macroeconomic performance was somewhat weaker. The analysis is based on comparable household surveys conducted at the beginning and end of the decade. At the national level the incidence of monetary poverty fell overall, and the evidence for this seems to be quite robust, consistent with other survey based evidence and with macroeconomic trends over the period. Most non-monetary indicators of poverty that are available from the survey also show improvements over the period, except for use of health care facilities which has deteriorated substantially over this period. However, a more detailed analysis presented in this paper, shows that there are strong patterns to this reduction in monetary poverty. Poverty reduction has been concentrated in specific localities (Accra and the rural forest region) and within particular activities (notably export oriented sectors and commerce). Households in other localities and working in other activities have experienced little poverty reduction, with some evidence of increasing depth or severity of poverty in some locations (especially in the northern savannah). Again these patterns of change are consistent with the sectoral pattern of growth over this period. The reduced use of health care facilities is consistent with reduced government spending in this area combined with the introduction of user charges. The survey data used in this paper also help provide a clear explanation for these observed trends, which typically differs from one region to another. Poverty reduction in Accra is strongly associated with a large increase in the numbers engaged in self-employment, primarily trading activities, combined with increased incomes from these activities. In the rural forest increased prices and production of cocoa play an important point in driving poverty reduction there, but food farmers also experience quite large poverty reductions (in contrast to other regions of Ghana). Poverty reduction among the food farmers there is primarily due to a substantially increased inflow of remittances much from outside the region (raising questions about its sustainability). This experience of remittances leading to poverty reduction among food farmers, the poorest group, is much less evident elsewhere in Ghana. Despite the reduction in the overall poverty figures, this paper highlights the limited benefits accruing to many of the poorest groups in Ghana over the 1990s and the increased differential between localities that emerged over this period. This is clearly not only a consequence of poor macroeconomic performance over the period, but also raises questions about the overall policy stance over this period and the extent to which it focused on poor, more remote regions and on non-export agriculture.
Presented at the ISSER-University of Ghana-Cornell University International Conference on "Ghana at the Half Century," July 18-20, 2004, Accra, Ghana



Financial Sector Liberalization on the Labour Market in Ghana
April 2003
Augustine Fritz Gockel and Nora Amu

One of the expected outcomes of the financial sector liberalization programme was that labour and capital resources would be priced efficiently in a competitive market. In a labour abundant country, labour intensive production techniques will emerge, as real wages fall sufficiently to contain employment and output. The study finds that firms are inclined to increase capital intensity than labour intensity given access to credit facilities. Furthermore, the high-cost-low-wage labour phenomenon plays a role in the low labour absorption in Ghana, especially where labour needs may be seasonal or dependent on the level of output. A more pragmatic labor law that allows flexibility for employers but also adequately compensate seasonal labour is needed.
Presented at the ISSER-University of Ghana-Cornell University International Conference on "Ghana at the Half Century," July 18-20, 2004, Accra, Ghana



Poverty Reduction Strategies in a Budget-Constrained Economy: The Case of Ghana
February 2003
Maurizio Bussolo and Jeffery I. Round

Analyses of responses to reforms in Ghana seem to indicate that current policies may be benefiting different segments of society disproportionately. Also, experience in the 1990s suggests that recurring budget deficits may adversely affect reform and poverty alleviation programmes. The aim of this paper is to carry out some experiments using variants of a stylised CGE model, to ascertain the possible effects on poverty of a range of budget-neutral redistributive income transfers. The analysis is based on a social accounting matrix (SAM) for Ghana for the year 1993, which has been substantially modified for the present application. The CGE model is a real-side, static model and therefore excludes the monetary and financial sectors and is designed in the tradition of other OECD Development Centre models. The experimental design follows one employed by Adelman and Robinson (1978) for Korea and Chia, Wahba and Whalley (1992) for the Côte d’Ivoire. However the experiments are designed with a view to examining the sensitivity of the results to alternative specifications, within otherwise broadly similar, SAM-based model structures. The main outcome is to show that the results are very sensitive to (long and short run) closure rules, to the financing rules in a budget-neutral setting, and to the method of computing poverty ratios (parametric and non-parametric approaches). A new decomposition method is introduced to assist in interpreting the results. A wide range of simulations demonstrates that poverty is not eradicated via redistributive income transfers, and may even increase, especially in the short run, after taking into account the secondary effects.
Presented at the ISSER-University of Ghana-Cornell University International Conference on "Ghana at the Half Century," July 18-20, 2004, Accra, Ghana



Banking Competition and Efficiency in Ghana
October 2004
Thierry Buchs and Johan Mathisen

This paper assesses the degree of bank competition and discusses efficiency with regard to banks’ financial intermediation in Ghana. By applying panel data to variables derived from a theoretical model, we find evidence for a noncompetitive market structure in the Ghanaian banking system, which may be hampering financial intermediation. We argue that the structure, as well as the other market characteristics, constitutes an indirect barrier to entry shielding the large profits in the Ghanaian banking system.
In Ernest Aryeetey and Ravi Kanbur (editors), The Economy of Ghana: Analytical Perspectives on Stability, Growth and Poverty, James Currey, 2008.
Presented at the DPRU-TIPS-Cornell University Forum on "African Development and Poverty Reduction: The Macro-Micro Linkage," October 13-15, 2004, Cape Town, South Africa



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