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Journal of African Economies Advance Access originally published online on April 26, 2007
Journal of African Economies 2008 17(1):62-84; doi:10.1093/jae/ejm005
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© 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

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

Tsegaye Yilmaa,1, Ernst Bergb and Thomas Bergera

a Josef G. Knoll Visiting Professorship for Development Research, Hohenheim University, Fruwirthstr. 12, 70593, Stuttgart, Germany
b Institute for Food and Resource Economics, Bonn University, Meckenheimer Allee 174, D-53115 Bonn, Germany

1 Tsegaye Yilma is the corresponding author, e-mail: tsegayey{at}gmail.com

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.

JEL Classification: Q15, Q16, Q18


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