A Political Economy Analysis of Income Diversification Activities of Rural Households in the Northern Region of Ghana

Abstract

This study analysed income diversification activities of 1,194 rural households in the Northern Region of Ghana using data from the sixth round of the Ghana Living Standards Survey (GLSS) undertaken by the Government of Ghana, through the Ghana Statistical Service. We found that 92% of rural households were engaged in farm activities affirming agriculture as the dominant profession of rural households in the region. The number of income-generating activities undertaken by these households was significantly related to the size of the household, previous apprenticeship training acquired by the household head, ownership of a motor bike/car, and ownership by the household of specific physical assets which also provide information, communication and entertainment services, namely mobile phone, radio and television sets. The share of wage-based income in the total household income was significantly related to the age of the household. The overall income diversification index was positively influenced by the level of remittances and the number of rooms in the house; the latter allowed for increased possibility of renting rooms in the house to workers. We also established that overall income diversification index was associated with decreasing total household consumption expenditures and reduced food security at relatively low levels. However, this index was linked to increasing household consumption expenditures and improved food security at relatively higher levels. Our findings suggest that income diversification could be an important poverty-reducing measure if well-designed Community and State support programmes for rural households are implemented in the region under conditions of peace and good security.

The Political Economy Dynamics of Rural Household Income Diversification: A Review of the International Literature

“…Income diversification deals both with broad groups of livelihood activities and within a particular group of livelihood activity. Broad groups of livelihood activities include (1) agriculture (crop and livestock production), (2) wage-based employment, (3) self-employment activities outside the agricultural sector, especially in the services sector, such as buying and selling activities, (4) renting of assets and (5) remittances (Perge & Mckay, 2016;Salifu and Anaman, 2019). Within-group livelihood diversification then implies the undertaking of various activities within a broad group, for example, crop diversification which entails the production of different crops by a household within the broad agriculture or farming livelihood group.…”

“…The methods used to measure income diversification are extensively reported in the literature (see for example, Haggblade et al, 2005;Reardon, 1997;Reardon & Taylor, 1996;Reardon, Taylor, Stamoulis, Lanjouw, & Balisacan, 2000). In particular, the renewed interest on the political economy analysis of income diversification activities has yielded additional measures of diversification of specific interest for the rural economy (FAO, 1998;Losch et al, 2012;Reardon, 1997;Reardon & Taylor, 1996;Reardon et al, 2000;Salifu and Anaman, 2019).…”

“…The often-cited measures of income diversification include the Herfindahl-Hirschmann Concentration Index, Simpson Index, Count Index, Margalef Index, Berger-Parker Index, Bhatia Index, Index of Maximum Proportion, Shannon Index, Ogive Index, Entropy, Modified Entropy, and Composite Entropy Indices (Marchetta, 2013;Chaplin, Davidova & Gorton, 2004;Salifu & Anaman, 2019). Probably, the most familiar diversification index is the Herfindahl-Hirschman Concentration index (HHCI) (Hirschman, 1945;Herfindahl, 1950;Herfindahl, 1959;Hirschman, 1964: Hall & Tideman, 1967.…”

“…Push income diversification although unsustainable may still be all the more important for rural households because of the apparent absence of social protection and safety nets in the developing world to insure them against risky agriculture. In Ghana, and especially in the five northern regions, push income diversification tends to peak in the dry season when there is a significant decline in farm income (Reardon, 1997;Salifu & Anaman, 2019). Rural households therefore rely on off-farm activities such as selling of farm products, migration, remittances and paramilitary escapades to supplement household incomes (Ellis, 1998;Losch et al, 2012;Reardon, 1997, Bryceson, 2002Grawert, 1998).…”

“…Rural household diversification of income activities may be seen as part of an active social process through which rural households seek additional income sources to supplement primary agricultural-based incomes. Social networks, associations such as farmer-based organisations, business development services, and personal positions in community, religion and culture, links to political power structures are important drivers of income diversification in rural areas (Ellis, 1998;Salifu and Anaman, 2019). Income diversification is also driven by differences in relative social importance among rural households in different agro-climatic zones (Reardon, 1997).…”