Horticultural Exports and Livelihood Linkages of Rural Dwellers in Southern Ghana: An Agricultural Household Modeling Application

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ABSTRACT

Increasing foreign exchange problems and the deteriorating prices of traditional export commodities in developing countries are leading agricultural policy makers and donor agencies to seek diversification in export crop production. In Ghana, horticultural crops such as pineapples, mangoes and papaya appear promising because of their high labor intensity and the expanding demand for fruits in industrialized nations. Consequently, few studies have examined the linkage between export diversification and microeconomic performance. In this study, a non-linear programming model of farm-household behavior is applied to households with different resource endowments and socio-economic characteristics by exploring observed responses to alternative factor and output price scenarios. Model results show significant differences in household responses to changes in wages, prices of local staples and world market prices of horticultural crops where, beyond critical price ranges and resource constraints leads to inverse supply responses for poor households. The findings suggest the need to design an integrated policy framework that is orientated towards improving rural market imperfections for sustaining the livelihoods of smallholders.

JEL Classifications: Q12, Q18, D1

Keywords: Horticultural Exports, Food Security, Household Livelihood, Agricultural Household Modeling, Ghana

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BACKGROUND INFORMATION

In response to the deteriorating terms of trade for traditional primary commodity exports from developing countries, and dynamic shifts in the global food chain, market liberalization, export diversification and export-oriented industrialization strategies have become a primary concern of most Sub-Saharan African countries including Ghana. Horticultural produce and semi-processed products from the developing world are becoming increasingly popular source of non-traditional export commodities both in domestic and in international markets. The increasing consumer demand in industrialized countries for out of season fresh fruits and vegetables has opened niche markets for African countries to produce these crops for export during the void period at attractive prices (Diop and Jaffee, 2005). Nevertheless, horticultural products are not immune to international market fluctuations as pertains to other primary commodities. Additionally, agricultural trade policy reforms have a complex range of welfare distributional effects on smallholders in developing economies, where food and agriculture are major sources of income and component of household expenditure.

Ghana is well endowed with natural resources and predominantly an export led economy having about twice the per capita output of the poorer countries (such as Sierra Leone, Niger and Burkina Faso) in West Africa (Thomi, 2001). Even so, it remains heavily dependent on international financial and technical assistance. Gold, Timber and Cocoa are traditionally the major sources of foreign exchange. The domestic economy continues to revolve around subsistence agriculture, which accounts for about two-fifth of GDP and employs 60% of the work force, constituting mainly of smallholders (Institute of Statistical Social and Economic Research, 2005). Following the failure of export policy through a restrictive trade regime and an import substitution industrialization policy of the 1970's, Ghana introduced an Economic Recovery Program (ERP) that was to be achieved through structural adjustment in co-operation with the International Monetary Fund (IMF) between the early 1980's and late 1990's.

As part of the ERP, Ghana in 1984 began to open up its economy to participate in international trade. The policy thrust was towards the development and promotion of non-traditional exports (NTEs) whilst maintaining the country's competitiveness in the traditional export sector. NTEs in this regard refer to crops that prior to the ERP did not have any significant export value. …