Rural Livelihood Diversification and Agricultural Sector Reforms in Ghana

By

Emmanuel Ekow Asmah Research Fellow, Brookings (Africa Growth Initiative) EAsmah@brookings.edu

Abstract Sufficient time has elapsed since agricultural sector reforms got underway in Ghana and so this study examines how some selected proxies of the reforms have changed overtime and evaluates their relative importance in influencing rural livelihood diversification and household welfare. In doing this, the paper pools data from the 1991/1992 and 2005/2006 Ghana Living Standards Survey (GLSS) and employs the endogenous switching regression technique. We find that diversified households and less diversified households differ significantly in terms of variables related to household assets, markets and institutions. Both household welfare and rural non-farm diversification decisions are mostly driven by household assets including good health, education, and household age composition. Households who live in communities with access to fertilizers, public transports and local produce markets are more likely to engage in non-farm diversification and enjoy improved welfare. The importance of access to TV and radio as effective mass media tools in influencing household behavior is underscored in the analysis. Targeting interventions that enhance livelihood diversification would ultimately have a positive impact on household welfare.

1.

Introduction Ghana has for over the past two decades been involved in a wide-range of economic

reforms aimed at creating an enabling environment for sustainable growth and development. These reforms which began under the framework of the Structural Adjustment Program marked the beginning of the deregulation of the economy and its transformation from an inefficient and import-dependent economy to one that is diversified, dynamic, efficient and export-oriented with a greater role for the private sector (Aryeetey et al, 2000). Within the agricultural sector, the reforms were implemented within the context to the Medium Term Agricultural Development Program (MTADP, 1991-2000). Agricultural policies were supported by a massive rural

development scheme, designed to provide the basic infrastructure of roads, water and electricity that would encourage people to stay in the rural areas rather than migrate to the overpopulated urban areas. In the cocoa sub-sector, the multiple buying systems, involving several companies, was re-established to replace the monopoly enjoyed by the United Ghana Farmers Co-operative Council. As part of the liberalization program, the guaranteed minimum prices for maize and rice were abolished and all subsidies were removed including those for agricultural inputs, notably fertilizers, insecticides and fungicides (Seini, 2002). In addition, the procurement and distribution of these inputs (which was hitherto the responsibility of the MOFA and COCOBOD) were privatized in order to enhance competition and efficiency in agricultural input marketing. The Agricultural Sector Investment Project (ASIP) under the auspices of the World Bank was also implemented between 1994 and 1998 with the following goals: (i) Financial support to producer associations and their support organs such as local authorities; (ii) Technical support to these groups by way of the development and design of their identified project need, and their implementation; and (iii) Skills training on effective management of projects to these same groups.

The Agricultural Sector Support Investment Programme (AgSSIP) was another initiative by the Ministry of Food and Agriculture (MOFA) to move the agricultural sector growth to higher growth rates from 4 to 6 percent over the period 2001 2010. It was set up as the main instrument for implementing the Accelerated Agricultural Growth and Development Strategy
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(AAGDS) that was itself formulated to enable Ghana achieve the status of a prosperous middle income country by the year 2020. The strategy includes plans to reform the land tenure system, encourage cash crop production, and supporting the private sector to add value to traditional crops. The overall reforms seem to be paying off since Ghana has in recent years witnessed some impressive economic performances.1 Yet, a number of structural challenges still limit the economy from achieving sustainable improvements in the livelihoods of the people. For example, the agricultural sector which has for long dominated economic activity is still characterized by low levels of productivity. Farm yields per hectare in Ghana are among the lowest in the world. Cocoa yields for example in Ghana are much lower than in neighboring Cote d'Ivoire at 350 kg per hectare compared with 800 kg per hectare (AGI, 2010). While advanced economies are using more than 100kg of fertilizer per hectare and producing thousands of kilograms of cereal per hectare, Ghanas use of fertilizer is about 20 kg per hectare (ISSER, 2009). The traditional dependence on rain-fed agriculture is still prevalent in Ghana and weather patterns are increasingly unpredictable and unreliable. The sector continues to be dominated by small holder farms (less than 3 hectors) with low use of new technology. Given that agriculture is a large sector in Ghanas economy and provides livelihood for over 60 percent of the population, it is also reasonable to suspect that the sectors lack of transformation may be a significant contributory factor to the food security and poverty challenges in the country. According to a USAID (2010) report, Ghana currently has nearly two million people still vulnerable to food insecurity and food remains a serious concern in many parts of the country. Analysis of poverty trends in Ghana based on the results of the Ghana Living Standards Survey, though impressive also leaves much to be desired. Significant intraregional differences in poverty levels exist and the speed of the reduction in poverty still remain a source for concern. Poverty levels have remained strikingly high (at between 52-88 percent) in the three northern - Northern, Upper East and Upper West (GSS, 2007).

Figures released by the Ghana Statistical Service (GOG, 2010) shows that the economy of Ghana is on the path of sustainable growth and among the league of middle income countries. The economy between 2002 and 2009 experienced real GDP growth of 5.37%. Evidence obtained from the 5th Ghana Living Standards Survey, (GLSS 5, 2005/06) indicates that upper poverty levels have declined from 1998/99 level of about 39.5% to about 28.5%. Extreme poverty also declined from 26.8% in 1998/99 to 18.2% in 2005/06.
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While recognizing the urgent need to maintain a robust agricultural sector, it is increasingly becoming clear that the agricultural sector alone cannot be relied upon as the core activity for rural households as a means of improving livelihood and reducing poverty. One phenomenon that is gaining prominence in the rural development literature is the promotion and support for nonfarm diversification opportunities (Stifel, 2010). Non-farm economic activities include seasonal migration off the farm to engage in wage employment, handicraft production, trading and processing of agricultural produce, provision of agricultural services etc. Such nonfarm activities provide a way of off-setting the diverse forms of risks and uncertainties (relating to climate, finance, markets etc) associated with agriculture and creates a way of smoothing income over years and seasons. The relative importance of non-farm activities in rural areas is well documented in Reardon (1997), Reardon et al (2001) and Barret et al (2001). Already, there is evidence that non-farm activities in both the rural and urban areas are widespread in Ghana. The fifth round of the Ghana Living Standards Survey (GLSS 5) estimates that approximately three million, two hundred thousand households representing about (46.4%) of households in Ghana operate non-farm enterprises. A case study of four rural communities in three ecological zones of Ghana by Oduro and Osei-Akoto (2007) gives further credence to this observation. Residents in the villages were found to be employed in a number of non-farm activities, such as hairdressing, carpentry, tailoring, trading, pito brewing, food processing, charcoal trading, masonry, sewing, teaching, and nursing. Lay and Schuler (2008) analyzed changes in income portfolios of rural households and found that asset-poor households, which account for an important share of the rural population, are likely to be pushed into activities off the farm to meet subsistence needs. Al-Hassan and Poulton (2009) document a study by the Ministry of Food and Agriculture (MOFA) which disaggregates households in 16 households in the three northern regions (12), Brong Ahafo 3) and Ashanti Region (1) according to their livelihood strategies as shown below.

Table: Livelihood Strategies of Households in Northern Ghana

Group Vulnerable (5%) Characteristics High proportion of orphans, school dropouts, youth economic migrants, widows with children, elderly, handicapped, sick High proportion of widows with children, youth semi-permanent migrants, migrants creating farms outside their tribal areas, smallscale farmers with weak labour capacities Large family and high labour capacity (i.e low dependency ratio) Assets 0-0.5 acres of land per active member; no livestock except 0-5 poultry; basic house & cooking equipment, clothes 0.3-2.5 acres per active member; 0-5 sheep/goats, 0-3 cattle (per household); Bicycle, roofing sheets Activities Sale of firewood, making baskets or ropes, collecting wild products, sheanut gathering, buy & sell foodstuffs

Poor (35%)

Food crops and livestock farming, petty trading, collection/processing/sale of NR products, seasonal and semi-permanent migration

Medium (51%)

1.5-4 acres per active member; 10-40 sheep/goats, 3-30 cattle; (semi-permanent house; modest education and assets (e.g. sewing machine, shop, TV) 1-25 acres per active member; 0-120 sheep/goats; 0-1000 cattle; larger, permanent house with water, electricity, kitchen, toilet, fridge; tractor, car/truck. May have two housesone in town, more modest on farm

Farm and non-farm activities

Well-off (9%)

Large family and high labor capacity, higher proportion of skilled labor

Agricultural: perennial (cocoa, rubber, mango), nontraditional or food crops (all on commercial scale); livestock (including commercial poultry). Noagric: tractor or transport services, medium-large-scale trading, shop/house rental, salaried positions

Source: Al-Hassan and Poulton (2009) These micro level evidences of diversification in Ghana are also mirrored at more aggregate sectoral levels as shown in the figures below. The agricultural sector which has for long dominated economic activity has in recent years given way to the services sector (GOG, 2010).

Figure 1: Sectoral Contributions to National Output, 2000 - 2008

Figure 2: Sectoral Growth Performance (2000-2008)

While some analysts see the growing trend of non-farm activities as a natural progression from a predominantly agrarian economy into a diversified and productivity economy dominated
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by manufacturing and services (push factors), others (e.g. Ellis and Freeman, 2004) attribute the signs to a distressed agricultural sector that is losing its labor force not as a consequence of agricultural growth triggering growth in other sectors of the economy, but as a consequence of lack of growth or income opportunities in agriculture (pull factors). Whichever way one looks at it, policy makers ultimately have a role to play either by way of providing the necessary incentives for agricultural households to maximize on existing opportunities or try to minimize the constraints households face in their effort to construct viable livelihood activities. Sound empirical information on issues at the household and community level that require attention would be necessary in this regard. Even though some extensive literature already exists on the causes and consequences of livelihood diversification, the evidence is somewhat mixed and ambiguous (Stifel, 2010, Bezabiw et al, 2010). The multitude of constraints and incentives faced by a largely heterogeneous households engaged in a multiple set of heterogeneous non-farm activities makes broad generalizations problematic (Reardon et al., 1994; Barrett et al., 2002; Haggblade et al, 2007). Attractive livelihood opportunities, according to Barret et al (2002) are normally accessible to those households who have better endowments in terms of human, financial and physical assets. And even where households have similar endowments, production techniques, preferences, constraints and incentives attached to particular livelihood activities may be different (Iiyama, 2006). In order to have a deeper understanding of the micro-economic constraints and incentives that influence livelihood diversification and the welfare implications of such decisions by agricultural households, this study examines and evaluates the importance of some selected proxies of the reforms in Ghana. Following the 2007 World Development Report framework for thinking about an agriculture-for-development agenda and Nankani (undated), we specifically focus on variables related to (i) assets (e.g. access to land, education, finance etc), (ii) markets (e.g. access to local markets, motorable roads) and (iii) institutions (e.g. extension services, producer organizations, sharecropping, access to radio, TV etc). To implement these objectives, we use data from the 1991/1992 and 2005/2006 Ghana Living Standards Survey (GLSS) to first describe the changes that have taken place among the chosen variables between the two periods. Second, based on the suspicion of unobserved heterogeneity and possible endogeneity in

establishing the econometric relationship between livelihood diversification and household welfare, we employ the endogenous switching regression approach for the analysis.2 This technique, following Lokshin and Sajaia (2004) relies on joint normality of the error terms and allows us to simultaneously estimate the binary and continuous parts of the model in the binary and continuous equations in order to yield consistent standard errors. By doing this, the paper provides additional insights to related studies on Ghana such as Oduro and Osei-Akoto (2007), Owusu and Abdulai (2009), Knudsen (2007) and Anriquez and Daidone (2008). The results provide guidelines that are helpful for governments in their effort to define concrete plans to reduce poverty and vulnerability as well as to enhance household well-being. The plan of the paper is as follows: Section 2 provides an overview of the study framework, followed by a discussion of the methodology in section 3. The results from the analysis are presented in section 4 whiles the conclusions and implications are discussed in the last section.

2.

Study Framework By rural livelihood diversification we are referring to the phenomenon where rural

households engage in multiple activities (either on-farm or off-farm, agricultural or nonagricultural) in order to survive and to improve their standard of living. On-farm diversification includes the introduction of new crops into farming systems or farmers investing in livestock, hunting, and fisheries. This is distinguished from off-farm activities which generally refer to activities undertaken away from the households own farm such as wage employment on other farms (Ellis and Freeman, 2004). As indicated earlier, the non-farm sector refers to those economic activities that are not primary agriculture even though they are usually related to farm activities. In conceptualizing the causes and consequences of rural livelihood diversification in Ghana, we follow the framework below:

It is possible that some unobserved characteristics that influence the decision to engage in non-farm activities could also influence household welfare once they engage in non-farm activities.
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Figure 1: Study Framework: Causes and Consequences of Livelihood Diversification Assets Physical (access to land, fertilizers), social (education, health status, household structure), financial (money), natural (time), etc

Institutions Producer Organizations, Extension Services, R &D, Sharecropping arrangements, mass media access

Markets Access to motorable roads, product markets, public transport, etc

Livelihood Diversification On-farm, off farm and Non-farm activities

Household Welfare

Source: Author The basic framework is predicated on the assumption that a households portfolio of nonfarm activities and how they impact on welfare is decided based on selected micro-economic constraints and incentives created through access to public and private resources embodied in assets, markets and institutions.3 By assets, we are referring to the natural, physical, social, financial and human resources of value to the household. Changes in the portfolio of assets, their productivity and the extent to which households have access to them are the attributes that are critical in determining livelihood diversification and ultimately household welfare (Dorward et al, 2003). The limitations from access to credit and lack of education, for example, have been

See Nankani (undated) for further exposition on these three building blocks for agricultural development. 9

highlighted by Bezabiw et al (2010) in their case study on Ethiopia. For small and marginal farmers, the importance of well-functioning markets helps in reducing transaction costs and risks involved in acquiring inputs and profitably selling outputs. For example, access to rural infrastructure including the presence of local markets, motorable roads, electricity, telecommunications, etc provide important means of intervening directly in market transactions in order to change costs or returns of economic activities. This creates direct and indirect nonfarm employment and income opportunities for the poor to improve welfare. The acknowledgement of the role of institutions in non-farm diversification is derived from the recognition that much of human interaction and activity is structured in terms of overt or implicit rules that define the incentives and sanctions households face (Hodgson, 2006). While the idea of institutions could be defined to include many components, we examine three of these that are particularly important for rural farm households namely, producer cooperatives, extension services and sharecropping.4 The theoretical foundation for the analysis is drawn from the agricultural household model elucidated by Singh et al (1986). The model is fundamentally based on farm operator preferences and decisions to maximize utility based on given cash, production techniques and time constraints. It is assumed the farm operators utility (and production function) depends on personal, farm and community characteristics that affect the production decisions. The decision facing the farm operator involves basically choosing the labor to supply to the farm and off the farm, and the amount of other inputs to use or purchase so as to maximize utility given prices, off-farm wages, and any other exogenous factors which shift the production function. First order conditions of this type of model give a system of factor supply and demand functions, which in turn authorizes the determination of labor allocation between farming and non-farm activities. The set of equations underlying this kind of framework can be found in McNamara and Weiss (2005) and Mathenge and Tschirley (2007) who also draw extensively from Singh et al (1986).

Ghana Apart from these three, Ghana has a good number of other institutions like research institutions, universities, public libraries, etc that provide support economic activities. The lack of data limited the investigation on many other institutions. A recent internet blog by Gobind Nankani (undated) provides a lengthy discussion on assets, markets and institutions as part of priority actions to transform agriculture in Ghana. The focus on these three variables alone is also due to data limitations.
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Many studies have examined the interaction between off-farm activities and household welfare. They include studies by Brck (2004) for Mozambique, De Janvry et al (2005) in Hubei province of China, Bezabih et al (2010) for Ethiopia, Mathenge (2008) for Kenya and Man and Sadiya (2009) on Malaysia. With regards to factors driving diversification, studies like Howe and Richards (1984), Binswanger, et al. (1993), Lebo and Schelling (2001) confirm the importance of paved roads, efficient communication facilities and provision of rural electrification in livelihood diversification. Kimenju and Tschirley (2008) in their study based on rural diversification in Kenya showed that income per adult equivalence, distance to an extension agent, population density of the village, and travel time to a city of 250,000 were statistically significant in determining rural livelihood diversification. Mduma and Wobst (2005) found that education level, availability of land, and access to economic centers and credit were the most important factors in determining the number of households that participated in off-farm works. Bezu et al. (2009) looked at the activity choice in rural non-farm employment and found that education, gender, and land holding to be the most important determinants of activity choice. De Janvry, et al. (1995) shows for Mxico maize producers that insufficient infrastructure among other key factors will increase transaction costs and determine that a majority of these producers may not be producing for the market and consequently may not be directly affected as producers by policies that affect the price of maize. Related empirical contributions on rural livelihood diversification for Ghana are not too many. Lay and Schuler (2008) analyzed changes in income portfolios of rural households, its determinants and related them to poverty and distributional outcomes in Ghana in the 1990s. The key finding from the study is that asset-poor households, which account for an important share of the rural population, are likely to be pushed into activities off the farm to meet subsistence needs. Drawing on empirical evidence from research in the Ghanaian cocoa frontier, the paper by Knudsen (2007) showed that a dynamic relationship exists between farm and non-farm activities, where the non-farm sector is heavily dependent on the farm sector for both investment and purchases. The paper concludes that the diversification of income evident in the cocoa frontier should not be seen as a process of de-agrarianization, as no empirical evidence points to farmers leaving cocoa farming, but rather engage in secondary activities to support their portfolios.

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The empirical analysis by Anriquez and Daidone (2008) suggests that there are costcomplementarities between the rural non-farm sector and the agricultural sector but demonstrates high levels of inefficiency in Ghanaian farms. The case by Owusu and Abdulai (2009) based on a propensity matching score show that nonfarm employment has a positive and robust effect on farm household income and a negative and significant effect on the likelihood of being food. Abdulai and Delgado (1999) jointly estimated the determinants of the decision of husbands and wives to participate in cash- income-oriented non-farm work in Northern Ghana by using a bivariate probit model. Human capital, as embodied in education and experience was found to be essential in increasing non-farm earnings and time allocation of rural families and to diversify the rural economy away from agriculture. The other variables non-labor income and distance to the regional capital were found to have a negative influence on the participation decisions of farm households. In an attempt to provide additional insights to the topic, the present study employs the endogenous switching regression techniques to estimate the relationship between livelihood diversification and farm productivity based on a more recent data set for Ghana. 3. Methodology The endogenous switching regression analysis, also known as the Mover or Stayer model, is applied to situations where one wishes to establish the effect of being in one of two different positions (status, regimes or states) on desired outcomes and the possibility of moving or staying in that particular position, regime or state (Tauer, 2005). In this study, the outcome of interest is household welfare and the two regimes or decision states are whether or not households are more or less diversified. The endogenous switching regression approach is being used because the decision whether or not to engage in livelihood diversification is voluntary and may be based on individual self-selection, causing a biased sample with non-probability sampling. Self-selection makes it difficult to determine causation. For example, one might notice a significantly higher welfare among those participate in off-farm participation and credit this difference to the offfarm participation decision. However, farm households that engage in non-farm activities may have systematically different characteristics from households that do not due to self selection. Those who choose to participate in off-farm activities might be more hard-working, studious and dedicated than those who did not participate, explaining the difference between the two groups. Neglecting these effects is likely to give a false picture of the relative welfare status among the
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diversified and non-diversified farm groups. These reasons warrant estimating distinct regressions for the two different groups (diversified and less diversified) instead of a homogenous and single welfare function. Doing this however leads to observations that are no longer random draws from the population which makes the use of ordinary least squares not appropriate. Following Lokshin and Sajaia (2004), the first step in the switching regression model is to determine the factors influencing livelihood diversification among the farm households based on a probit function is specified as:

Di = ' Z i + 0i ---------------------------------------------* *

(1)

Where Di is the latent dependent variable which we observe through the decision to engage in livelihood diversification activities and Di = 1 if Di > 0 (diversified) and Di = 0 if Di 0
* *

(less diversified). Diversification is defined as participation in the local non-farm sector through wage or self-employment. The subscript i denotes farm-households, Z i is a vector of exogenous variables gender, age, level of education, number of dependants, land size and selected community infrastructure variables that account for community differences in income generation that may affect diversification as well as the level of household expenditures. Also, i are
'

vectors of unknown parameters and 0i is the disturbance term. The second step in the switching regression model is to define separate welfare functions for the two groups of farm households. Their welfare functions are expressed as: W1i = 1 X 1i + 1i W2 i = 2 X 2 i + 2 i If Di = 1 -----------------------If Di = 0 ----------------------(2) (3)

Where W1 and W2 represent welfare functions for households engaged with non-farm activities and those who do not. Household welfare is defined here as a households command over market and non-market goods and services at the household level. The proxy used to measure household

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welfare is the log of household consumption expenditure adjusted by adult equivalent units.5 X 1 and X 2 are vectors of weakly exogenous variables; 1 and 2 are vectors of parameters; and

1 and 2 are random disturbance terms. The underlying assumption here is that diversification is
endogenous to household welfare. Also, by splitting the sample into two, the problem of sample selection bias may arise. In order to deal with these challenges, the switching regression technique relies on joint normality of the error terms in the binary and continuous equations. The error terms, 0i , 1i and 2i are assumed to have a trivariate normal distribution with zero mean and non-singular covariance matrix specified as:
12 Cov( 1 , 2 , 0 ) = 12 10

12 10 2 2 20 20 02

-----------------------------------

(4)

2 where 12 and 2 are variances of the error terms, 1 and 2 , in equations (2) and (3); 02 is the

variance of the error term, 0 , in equation (1); 12 , 10 and 20 are the covariance of 1 and 2 ,

1 and 0 , 2 and 0 , respectively. The simultaneous estimation based on the full information
maximum likelihood (FIML) estimation of the equations 1- 3 corrects for the selection bias in the household welfare estimates.6 This is implemented using the move-stay command in STATA. The estimates generated through this technique include the inverse Mill's ratio, which measures the ratio of the ordinate of a standard normal to the tail area of the distribution and reflects the probability that an observation belongs to the selected sample (Heckman 1979). Other estimates from interaction of the error terms show the correlation of the unobservables of the diversification equation with the unobservables of household welfare equations. Data Data for the study are derived from the nationally representative multi-purpose Ghana Living Standards Survey (GLSS) for 1991/1992 and 2005/2006. These surveys provide a valuable source of detailed data including socio-economic situation of individuals, households,

Definition and measurement of other variables in the model have been provided in Appendix 1. The logarithmic likelihood function for the system of equations based on the assumption of trivariate normal of the error terms is similar to that found in Lokshin and Sajaia (2004).
6 5

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communities, and regions in Ghana. It includes data on demographic characteristics, health, education, economic activities and migration. The survey consists of both a household questionnaire and a community questionnaire, and data from either of these are combined for this paper. In order to also analyze the role of media access (TV, radio, newspapers) on diversification and welfare, additional data was sourced from the Demographic and Health Surveys (DHS) for the years 1993 and 2003.7 4. Results and Discussion 4.1 Descriptive Statistics

The first part of the results provides a description of how the household, community and institutional variables for the sample households have changed between 1991/1992 and 2005/2006 in terms of the percentage of distribution of the survey and t-tests. As shown in Table 1, we find significant increases in household welfare, measured as household consumption expenditure adjusted by adult equivalent units. Similar significant increases were also observed in the percentage of farm households engaged in non-farm diversification. No significant difference is observable in the education of the head of household and aged members above 60 years. Significant increases were observed in the age structure of household members within the two periods.

Although the timing of the DHS does not entirely coincide with the GLSS, the ten year interval between the surveys we use fall entirely within the fifteen-year interval between the GLSS surveys. This ensures that changes in the DHS data occur entirely within the period under consideration). See also Asmah and Taiwo (2011) for more details on this.
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Table 1: Characteristics of Surveyed Households and Communities Variable Welfare Non-farm Diversification Total acres of land Remittances Disease Burden Gender of Household Head Age of Household Head Education of Household Head Size of Household Members aged 5-14 Members aged 15-24 Members aged 25-39 Members 40-59 Members aged above 60 Motorable road in community Bank in community Local community market Extension worker in community Agric cooperative in community Farmers use fertilizer Farmers use insecticide Land Market Sharecroppers in community 1991/1992 1,061,975 0.81 251.72 0.58 0.07 1.25 45.43 0.65 4.84 1.55 0.77 0.76 0.63 0.32 0.81 0.09 0.39 0.25 0.29 0.55 0.58 0.11 0.66 2005/2006 1,438,117 0.85 211.73 0.51 0.08 1.22 46.82 0.68 4.99 1.45 0.87 0.85 0.72 0.35 0.84 0.05 0.29 0.24 0.31 0.68 0.70 0.12 0.55 Significance of change *** ** * ** * ** ** increase not significant * ** ** ** ** increase not significant increase not significant reduction not significant *** Decrease not significant Increase not significant *** *** increase not significant ***

*Means difference is significant at 10%, ** means difference is significant at 5% and *** means difference is significant at 1%.

For the 242 community variables surveyed in 1991 as against 328 in 2005, we find that the increases in access to motorable roads, farmers use of fertilizers and insecticides were not significantly different from zero. Noticeable and significant reductions were however observed
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for the practice of sharecropping and the existence of local markets. With regards to communities with access to land markets, extensions services and where existence of agricultural cooperatives, no meaningful changes were found between 1991 and 2006. Given that rural households are spread over large areas and that information transmission to farming communities was problematic, we decided to explore the role of access to TVs and radios on welfare and livelihood diversification. Data obtained from the Ghana Demographic and Health Surveys over a 10 year period between 1993 and 2003 showed significant increases in the proportion of households who listen to radio and watch television at least once a week. 4.2 The Endogenous Switching Regression Results

The full information maximum likelihood estimates of the endogenous switching model based on pooled cross-sections data are reported in table 2. The first and second columns present the estimated coefficients of the welfare functions of the less diversified and diversified groups respectively whiles the probit selection equation for the off-farm diversification equation is shown in the third column. A Wald test of whether the estimated coefficients as a group are different between the more diversified and less diversified equations produced a chi-squared value of 184.08 with 25 degrees of freedom. This means that the coefficients are statistically different. The likelihood ratio test for joint independence of the three equations rejects the null hypothesis that all slope coefficients are equal to zero at the 1 percent level (chi-squared value was 71.77). The simultaneous modeling based on the switching regression technique was justified given the highly significant off-diagonal values of the error covariance matrix and the error correlations. The correlation coefficients rho_1 and rho_2 are both positive and significant. This means both observed and unobserved factors influence the decision to participate in off-farm employment and welfare resulting from those decisions. This also indicates that self-selection occurred in the off-farm participation decision and welfare given the participation decision. In other words, farm households who participate in off-farm employment have higher welfare than random households from the random sample who have not participated in non-farm work. Engaging in off-farm diversification had a significant impact on welfare among those who participated in it.

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Table 2: Full Information Maximum Likelihood Estimates of the Switching Regression Model Based on Pooled Data for 1991 and 2005 Welfare =0 Variable Education of Household Age of Household Head Gender of Household Head Size of Household Members aged 5-14 Members aged 15-24 Members aged 25-39 Members aged 40-59 Members aged above 60 Sector of Employment of Head Access to Remittances Acres of Land Owned Agricultural Land Sales Access to Motorable Roads Access to Banking Center Access to Produce Market Member of Agric Cooperative Access to Public Transport Agricultural Sharecropping Access to Extension Service Households Use Fertilizers Listens to radio at least once a week Watches TV at least once a week Read newspapers at least once a week Time Dummy (2006) Constant Rho_1 = 0.80906 *** (0.0531) Rho_2 = 0.59552 *** (0.054255) Less Diversified 0.2382**(0.0489) 0.0739**(0.0036) 0.4986**(0.1044) -0.0139 (0.0508) 0.1257* (0.0761) Dropped 0.2415**((0.0629) -0.0995 (0.08103) -0.1685 (0.1241) -0.0911 (0.0656) 0.00912 (0.0605) 0.01916 (0.0138) 0.02513 (0.0863) 0.0784 (0.0977) -0.0282 (0.1415) 0.12156* (0.06706) -0.0406* (0.06415) 0.1997**(0.07175) 0.06995 (0.0732) -0.03022 (0.0747) 0.1089* (0.0667) -1.1431* (0.60843) 0.3956 (0.3631) 1.5548** (0.76699) 0.6284***(0.1818) 14.1017***(0.48165) Welfare =1 Diversified 0.1528*** (0.01445) -0.00125 (0.0013) 0.1266 *** (0.02986) -0.1239*** (0.01233) 0.0354** (0.0155) 0.0655** (0.01693) 0.09044*** (0.02413) 0.05255** (0.0255) 0.0755** (0.0323) -0.03031** (0.0080) 0.0008 (0.02099) 0.01048 ** (0.00474) 0.0307 (0.0303) -0.07156 * (0.03688) 0.00132 (0.04449) 0.06706** (0.0238) -0.04821** (0.02242) 0.17969** (0.02742) 0.1213**(0.0259) 0.00418 (0.0258) 0.0.07252** (0.02399) -0.87463** (0.22954) 0.61385*** (0.12974) 1.3685*** (0.27167) 0.53607*** (0.07078) 13.8454*** (0.13764) Non-farm Diversification (Select Equation) 0.1902** (0.05256) -.01445*** (0.00422) 0.8656*** (0.1064) Dropped 0.65586*** (0.0486) 0.50343*** (0.04848) 0.85054*** (0.06303) 0.43886*** (0.07436) 0.55888** (0.1175) -0.19631*** (0.03613) -0.05868 (0.07096) -0.02113 (0.01544) 0.05455 (0.10318) -0.08697 (0.11655) -0.00244 (0.16449) 0.04126 (0.07999) -0.0665 (0.07463) 0.18464** (0.08584) 0.02327 (0.08681) -0.00805 (0.087777) 0.07172 (0.07796) -0.8596*** (0.27064) 0.17891 (0.40968) -0.37409 (0.79786) Dropped -0.87211** (0.31743)

Number of Observations = 3264 Wald chi 2 (25) = 184.08 Prob > chi2 = 0.00000

LR test of independent equations: chi 2 (2) = 71.77 Prob > chi2 =0.0000 *Means difference is significant at 10%, ** means difference is significant at 5% and *** means difference is significant at 1%. Also standard errors are shown in parenthesis.

18

Household Assets and Composition The findings from for variables related to household assets and composition are quite interesting. The age structure of the household which attempts to capture the life-cycle effects was found to be significant correlates of household welfare and livelihood diversification. The coefficient of household heads age is positive and significant which means that a farm households welfare is improved as age increases. This coefficient was however significantly negative in the probit selection equation, implying that the likelihood to engage in non-farm diversification decreases as the head of household grows in age. Furthermore, households where there are members aged 5 or older have a greater probability to engage in non-farm work with the likelihood for positive dividends on welfare. This could be due to the fact that participation in off-farm work is critically dependent on labor availability. But in terms of the size of the household, we find that the coefficient of household membership size appeared to be negative but statistically insignificant for the welfare of non-diversified households. This means that, holding all other variables constant, each additional child decreases the probability of increased household welfare and puts a greater burden on the household. The gender dummy variable represents the gender segregation between men and women household heads. The estimated sign of the gender variable is positive for all the models, which indicates that relative to femaleheaded households, the level of welfare and non-farm diversification is likely to be high for male-headed households. The level of education and the health status of household members in the model represent human capital endowment. The results from table 2 show that education of the head of the household has a significant and positive effect on households non-farm diversification as well as household welfare. The higher the level of education, the greater the probability that households will engage in non-farm work and ultimately have improved welfare. With regards to the health status variable, we find from the analysis that the tendency to engage in non-farm work reduces when the burden of disease is high, which is what we generally expect in theory. Owning land is an important asset in improving the welfare of households who engage in non-farm work. We surprisingly find no significant effect of land ownership on the selection decision whether or not to participate in non-farm work. Applying fertilizers is shown in the results to be justifiable as we find out that those farming households who use fertilizers (specifically, those who engage in
19

non-farm diversification) have a greater likelihood of enjoying improved welfare. The impact of access to insecticides was statistically insignificant and was dropped from the model. The problem of the exclusion of rural populations from financial services is widely acknowledged. It was therefore not too surprising we uncovered no significant impact of access to remittances and banking services on welfare and the non-farm participation decision. The importance of the sector of employment of the household head is clearly underscored in the analysis. The results show that relative to other jobs other than agriculture, the level of welfare and non-farm diversification is likely to be lower for household heads who work in the agricultural sector. Market Access For small and marginal farmers, having access to markets helps in reducing transaction costs and risks involved in acquiring inputs and profitably selling outputs. Having access to local community markets was found to be positive and significant in promoting welfare of diversified households. This was not the case for less diversified households. We also find that access to local markets has no direct correlation with the livelihood diversification decision. As was expected, households who live in communities with better access to public transport have a higher probability to engage in non-farm work and also enjoy higher welfare. Access to public transport facilitates movement of persons, farm inputs and outputs in a cost effective way. We realized that this finding was robust for all the groups studied. Strikingly, however, we find that access to motorable roads turns out to be negative and significant at 10 percent in the welfare function of diversified households and insignificant in the case of the selection decision and welfare of less diversified groups. Institutions Transfer of information and knowledge to small farm households working in diverse settings, remote locations and some of whom are illiterate is very challenging task. The traditional models of transferring knowledge in Ghana are largely based on extension activities and agricultural cooperatives. In this last set of results, we discuss how traditional and nontraditional sources of obtaining agricultural information affect non-farm diversification and household welfare. We find no significant effect of access to extension services on non-farm diversification and also household welfare. This may not be too surprising considering the fact
20

that agriculture extension departments in Ghana lack the resources and state-of-the-art technologies to deliver the required services to farming communities. With regards to the importance of agricultural cooperatives, we find a negative and significant likelihood effect on the welfare of diversified households. The effect of agricultural cooperatives on the diversification decision and the welfare of less diversified households are insignificant. Looking at the history, culture, type and structure of co-operative organizations in Ghana and elsewhere in Africa, this result may not necessarily be surprising. We normally see traditional agricultural cooperatives as disintegrated stand alone groups promoted through collective ownership with minimal capital investment who are unable to see problems of their members in terms of solutions generated by the co-operative movement as a whole, but rather, they look to the government when seeking co-operative solutions (Chambo, 2009). One aged-long risk-sharing institution in Ghana that turned out to have a positive and significant effect on household welfare is the idea of sharecropping. This is the system where a landowner allows a tenant to use the land in return for a share of the farm produce. The likelihood impact of sharecropping in the selection equation and in the welfare of less diversified households was however not significantly different from zero. Beyond the traditional knowledge institutions that are typically available to rural farmers, access to TV and radio networks are important channels through which various kinds of information can be transmitted to farm households. After controlling for other variables in the model, we found some interesting results when we included these mass media variables. Households who listen to radio at least once a week were found to have a greater likelihood to engage in non-farm work. With regards to promoting household welfare, instead of a positive effect, we found a significantly negative effect of access to radio for both diversified and less diversified groups. In the case of households who watch television at least once a week, a positive and significant welfare impact was found for the more diversified group. Though difficult to interpret, these findings underscore the significance of such mass media tools to either positively or negatively influence household behavior.

21

5.

Conclusions and Policy Implications Since the implementation of the market-oriented agricultural sector reforms in the late

1980s, there has been a remarkable diversification trend in rural Ghana characterized by developments of non-agricultural rural enterprises. The paper draws from the 1991/1992 and 2005/2006 Ghana Living Standards Household Surveys to also throw light on how selected elements of the agricultural sector reforms impact on non-farm diversification and household welfare. We find that non-farm diversification activities and household welfare are mostly driven by household assets and compositions including household age structure, education level and gender. The role of market access, fertilizer use and public transportation are also critical dimensions of rural livelihood diversification and household welfare and merits attention by policy makers. The idea of sharecropping as a risk-sharing mechanism is also not misplaced and needs to be supported. Among the information variables, listening to radio and providing access to televisions are effective tools in influencing household livelihood diversification and welfare, conditional on other relevant variables. All in all, the paper supports the emerging consensus that the livelihood diversifications are important means of enhancing welfare and deserves attention.

22

References: Al-Hassan, R. and Poulton, C. (2009), Agriculture and Social Protection in Ghana, FAC Working Paper, No. SP04, January. Aryeetey, E., Jane, H. and Machiko, N. (2000), (eds.) Economic Reforms in Ghana: The Miracle and the Mirage, Oxford: James Currey and Woeli Publishers. Barrett, C., Bezuneh, M., Clay, D. and Reardon, T. (2005). Heterogeneous Constraints, Incentives and Income Diversification Strategies in Rural Africa, Quarterly Journal of International Agriculture, 44(1): 3760.

Barrett C.B., Place, F. and Aboud, A. A. (2002), Natural Resources Management in African Agriculture: Understanding and Improving Current Practices. Oxon and New York: CABI Publishing. Barrett, C. B., Reardon, T. and Webb, P. (2001), Non-farm Income Diversification and Household Livelihood Strategies in Rural Africa: Concepts, Dynamics, and Policy Implications Food Policy, 26 (4): 315 31. Bezabih, M., Gebreegziabher, Z., Gebre, M. and Khlin, G. (2010), Participation in Off-Farm Employment, Rainfall Patterns, and Rate of Time Preferences: The Case of Ethiopia, Working Paper Series, EfD DP 10-21, Environment for Development. Bezu, S., Holden, S. and Barrett, C.B. (2009), Activity Choice in Rural Non-farm Employment: Survival versus Accumulation Strategy, A Paper Presented at the 8th Nordic Conference in Development Economics, Oscarsborg, Drobak, Norway, June. Binswanger, H., S. Khandker, and M. Rosenzweig, (1993), How Infrastructure and Financial Institutions Affect Agricultural Output and Investment in India, Journal of Development Economics, 41: 337-66. Brck, T. (2004), The Welfare Effects of Farm Household Activity Choices in Post-War Mozambique, Discussion Papers 413, German Institute for Economic Research, Berlin, Chambo, S.A. (2009), Agricultural Cooperratives: Role in Food Security and Rural Development, A Paper Presented to Expert Group Meeting on Co-operatives Held on 28 30 April, 2009, New York. Sourced from: http://www.un.org/esa/socdev/egms/docs/2009/cooperatives/Chambo.pdf De Janvry, A., Sadoulet, E. and Gordillo de Anda, G., (1995), NAFTA and Mexicos Maize Producers, World Development, 23(8):1349-1362.

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De Janvry, A., Sadoulet, E. and Ngong, Z. (2005), The Role of Non-Farm Income in Reducing Rural Poverty and Inequality in China, Working Paper Series 1001, Department of Agricultural and Resource Economics, University of California at Berkeley, Dorward, A., Poole, N., Morrisson, J. Kydd, J. and Urey, I. (2003), Markets, Institutions, and Technology: Missing Links in Livelihood Analysis, Development Policy Review, 21 (3): 319332. Ellis, F. and Freeman, H. A. (2004), Rural Livelihoods and Poverty Reduction Strategies in Four African Countries, The Journal of Development Studies, 40(4). Ellis, F. (2004), Occupational Diversification in Developing Countries and Implications for Agricultural Policy, Program of Advisory and Support Services to DFID (PASS), Project No: WB0207. Ellis, F. (2000), Rural Livelihood Diversity in Developing Countries: Analysis, Methods, Policy, Oxford: Oxford University Press. Ellis, F., (1998), Household Strategies and Rural Livelihood Diversification, The Journal of Development Studies, 35(1): 1-38. Ghana Statistical Service (2007), Pattern and Trends of Poverty in Ghana, 1991-2006, Accra, Ghana Statistical Service. Government of Ghana (2010), Budget Statement and Economic Policy of the Government of Ghana for the 2011 Financial Year, Accra, MOFEP. Haggblade, S., Hazell, P. and Reardon, T., (2007), Introduction, in Haggblade, S, P. Hazell, and T. Reardon, (Eds), Transforming the Rural Nonfarm Economy, Baltimore, Johns Hopkins University Press. Heckman, J. (1979), Sample Selection as a Specification Error, Econometrica, 46: 153-161. Hodgson, G. M. (2006), What are Institutions, Journal of Economic Issues, Vol, XL, No. 1. Howe, J. and P. Richards, (1984), Rural Roads and Poverty Alleviation: A Study Prepared for the International Labor Office within the Framework of the World Employment Programme, London: Intermediate Technology Publications. Iiyama, M. (2006), Land Use Change Impacts and Dynamics, LUCID Project Working Paper No. 51, International Livestock Research Institute, Institute of Statistical, Social and Economic Research (ISSER), (2009), The State of Ghanaian Economy in 2008, Accra, ISSER.
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Knudsen, M. H. (2007), Making a Living in the Cocoa Frontier, Western Ghana: Diversifying Incomes in a Cocoa Economy, Danish Journal of Geography, 107(2); 29-44. Lay, J. and Schuler, D. (2007), Income Diversification and Poverty in a Growing Agricultural Economy: The Case of Ghana, Working Paper, Kiel Institute for the World Economy. Lebo, J. and D. Schelling, (2001), Design and Appraisal of Rural Transport Infrastructure: Ensuring Basic Access for Rural Communities. World Bank Technical Paper, No. 496. Washington, D.C.: World Bank. Lien, G., Kumbhakar, S.C. and Hardaker, J. B., (2007), Determinants of Part-Time Farming and its Effects on Farm Productivity, A Paper Prepared for Presentation at the 107th EAAE Seminar, Sevilla, Spain, January/February. Lokshin, M. and Sajaia, Z. (2004), Maximum-Likelihood Estimation of Endogenous Switching Regression Models, Stata Journal 4(3): 282-289 Man, N and Sadiya, S.I., (2009), Off-farm Employment Participation Among Paddy Farmers in the Muda Agricultural Development Authority and Kemasin Semerak Granary Areas of Malaysia, Asia-Pacific Development Journal, 16(2). MacNamara, K.T., and Weiss, C., (2005), Farm Household Income and On and Off-farm Diversification, Journal of Agricultural and Applied Economics, 37 (1): 37-48. Mathenge, M. W. K, (2008), Essays on Off-farm Labor Market Participation, Farm Production Decisions and Household Economic Wellbeing: Empirical Evidence from Rural Kenya, An Unpublished Doctoral Dissertation submitted to Michigan State University. Mathenge, M. K., and Tschirley, D. (2007), Off-farm Work and Farm Production Decisions: Evidence from Maize-Producing Households in Rural Kenya, Paper submitted for the CSAE Conference 2007 on Economic Development in Africa, St. Catherines College, University of Oxford, UK: March 18-20, 2007, Mduma, J. and Wobst, P. (2005), Determinants of Rural Labor Market Participation in Tanzania, African Studies Quarterly 8(2), http://www.africa.ufl.edu/asq-v8/v8i2a2.htm Nankani, G (undated) The Challenge of Agriculture in Ghana: What is to be Done? sourced http://www.gnankani.com/pdf/The_Challenge_of_Agriculture_in_Ghana.pdf Oduro, A. D. and Osei-Akoto, I., (2007), Market Participation and Rural Poverty in Ghana in the Era of Globalization, UNU-WIDER Research Paper, No. 2007/70, World Institute for Development Economics Research. Owusu, V. and Abdulai, A. (2009), Nonfarm Employment and Poverty Reduction in Rural Ghana: A Propensity-Score Matching Analysis,
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Reardon, T., Berdegue, J, and Escobar, G. (2001), Rural Non-farm Employment and Incomes in Latin America: Overview of Issues, Patterns and Determinants, World Development, 29(3):395409. Reardon, T. (1997), Using Evidence of Household Income Diversification to Inform the Study of Rural Non-agricultural Labor Market in Africa, World Development, 25 (5):735-748. Reardon T, Crawford, E. and Kelly, V. (1994), Links between Non-farm Income and Farm Investment and Farm Investment in African Households: Adding the Capital Market Perspective, American Journal of Agricultural Economics, 76(5): 1172-1176 Seini, W.A. (2002), Agricultural Growth and Competiveness Under Policy Reforms in Ghana, Technical Publication No. 61, Institute of Statistical, Social and Economic Research (ISSER), University of Ghana, Legon, Singh, I., Squire, L. and Strauss, J (eds) (1986), Agricultural Household Models: Extensions, Applications and Policy, Baltimore: John Hopkins University Press. Stifel, D., (2010), The Rural Non-farm Economy, Livelihood Strategies and Household Welfare African Journal of Agricultural and Resource Economics, 4(1). Tauer, L. (2005), The Impact of Recombinant Bovine Somatotropin on Dairy Farm Profits: A Switching Regression Analysis, AgBio Forum, 8(1): 33-39. USAID (2010), Feed the Future Initiative: Ghana FY 2010 Implementation Plan, sourced from http://www.usaid.gov/gh/FTF/Ghana%20IP%20508.pdf

26

Appendix 1 Definition and Measurement of Variables (i) Household Welfare This is defined as a households command over market and non-market goods and services at the household level. The proxy used to measure household welfare is the log of household consumption expenditure adjusted by adult equivalent units. Non farm Diversification is defined as participation in the non-farm sector through wage or self-employment. We use a dummy variable which is 1 if households engage in non-farm activities and 0 if otherwise; Gender of the household head - a dummy variable with male = 1 and female = 0; Remittances a dummy for access to remittances Total acres of land owned value of land owned Size of Household Number of members in the household Age of the Household Head - Age of the household head (in years)

(ii)

(iii) (iv) (v) (vi) (vii)

(viii) Education of the Household - Highest level of education completed by household head where 0 is defined for those with no education, 1 = Primary; 2 = Secondary, and 3 = Higher (ix) Disease Burden - defined as the number of days (over a two week period) individual falls sick plus the number of days (over a two week period) individual does not work. This is then expressed as an index between 0 and 1 where lower indices represent good health or low disease burden and higher indices mean poor health status or high disease burden. Access to motorable roads 1 for respondents who have access or 0 otherwise; Access to a bank - 1 for those who said yes and 0 for those who said no. Access to community market 1 for those who have access and 0 for those who dont;

(x) (xi) (xii)

(xiii) Access to fertilizers 1 for respondents who use fertilizers or 0 otherwise; (xiv) (xv) (xvi) Agricultural sharecropping 1 if sharecropping exists in community or 0 otherwise; Access to extension worker 1 if respondents have access or 0 otherwise; Agricultural cooperatives 1 if farmer belongs to cooperative, 0 otherwise;

(xvii) Access to public transport 1 if farmer has access to public transport or 0 otherwise;

27

Appendix 2
Endogenous switching regression model Number of obs Wald chi2(25) Log likelihood = -3304.5201 Prob > chi2 = = = 3264 184.08 0.0000

-----------------------------------------------------------------------------| Coef. Std. Err. z P>|z| [95% Conf. Interval]

-------------+---------------------------------------------------------------Lwelfare0 | .009121 .0191561 .0783587 -.0281915 -.1215569 -.0302252 -.040577 .0251328 .0699488 1.554846 .3955658 -1.143091 .2382284 .4985974 .0073992 -.013966 .1257467 .2415373 -.0994628 -.1685147 .1996609 .1089106 -.0268939 .0604691 .0137696 .0976524 .1414993 .0670699 .0747378 .0641542 .0863004 .0732173 .7669942 .363097 .6084317 .0489004 .1043724 .0035988 .0508049 .0761481 .0628704 .0810294 .1241421 .0717484 .0666566 .0731784 0.15 1.39 0.80 -0.20 -1.81 -0.40 -0.63 0.29 0.96 2.03 1.09 -1.88 4.87 4.78 2.06 -0.27 1.65 3.84 -1.23 -1.36 2.78 1.63 -0.37 0.880 0.164 0.422 0.842 0.070 0.686 0.527 0.771 0.339 0.043 0.276 0.060 0.000 0.000 0.040 0.783 0.099 0.000 0.220 0.175 0.005 0.102 0.713 -.1093962 -.0078318 -.1130364 -.305525 -.2530115 -.1767086 -.1663168 -.144013 -.0735544 .0515646 -.3160913 -2.335595 .1423853 .2940312 .0003456 -.1135417 -.0235008 .1183136 -.2582776 -.4118288 .0590367 -.0217339 -.1703211 .1276383 .0461441 .2697538 .249142 .0098978 .1162583 .0851629 .1942785 .2134521 3.058127 1.107223 .0494137 .3340715 .7031636 .0144527 .0856098 .2749942 .3647609 .059352 .0747994 .3402851 .239555 .1165332

remitd | lacres | mroad | bankce | market | agrext | agcoop | aglsel | agshar | hnpape | htelev | hradio | hedu | hsex | hage | mem | age5_14 | age25_39 | age40_59 | age60 | pubtra | agfert | aginse |

28

seg | d06 | _cons |

-.0911115 .6283705 14.10169

.0655862 .1818483 .4816529

-1.39 3.46 29.28

0.165 0.001 0.000

-.2196581 .2719544 13.15767

.037435 .9847866 15.04571

-------------+---------------------------------------------------------------Lwelfare1 | -.0008156 .0104826 -.0715622 -.0013213 .0670553 .0041807 -.0482111 .0306992 .102497 1.368516 .6138525 -.8746322 .152787 .1266193 -.0012562 -.1239481 .0354433 .0654552 .0903548 .0525537 .0755463 .1796927 .0725157 -.0250739 -.0303092 .5360735 13.84539 .0209995 .0047392 .036879 .0444877 .0237906 .025807 .0224249 .030289 .02647 .2716688 .129744 .2295364 .0144463 .0298603 .0013136 .0123327 .0154614 .0169266 .0241339 .0255463 .0322791 .0274209 .0239895 .0269926 .0079465 .0707823 .1376445 -0.04 2.21 -1.94 -0.03 2.82 0.16 -2.15 1.01 3.87 5.04 4.73 -3.81 10.58 4.24 -0.96 -10.05 2.29 3.87 3.74 2.06 2.34 6.55 3.02 -0.93 -3.81 7.57 100.59 0.969 0.027 0.052 0.976 0.005 0.871 0.032 0.311 0.000 0.000 0.000 0.000 0.000 0.000 0.339 0.000 0.022 0.000 0.000 0.040 0.019 0.000 0.003 0.353 0.000 0.000 0.000 -.0419738 .001194 -.1438437 -.0885156 .0204265 -.0464001 -.0921632 -.028666 .0506167 .8360552 .3595589 -1.324515 .1244727 .0680942 -.0038309 -.1481197 .0051395 .0322798 .0430533 .002484 .0122803 .1259487 .0254971 -.0779785 -.0458841 .3973427 13.57561 .0403426 .0197712 .0007194 .085873 .1136841 .0547615 -.004259 .0900645 .1543773 1.900977 .868146 -.4247491 .1811013 .1851444 .0013185 -.0997765 .0657471 .0986307 .1376564 .1026235 .1388122 .2334366 .1195342 .0278307 -.0147343 .6748044 14.11516

remitd | lacres | mroad | bankce | market | agrext | agcoop | aglsel | agshar | hnpape | htelev | hradio | hedu | hsex | hage | mem | age5_14 | age15_24 | age25_39 | age40_59 | age60 | pubtra | agfert | aginse | seg | d06 | _cons |

29

-------------+---------------------------------------------------------------select | -.058679 -.0211263 -.5854493 -.0869652 .002437 .0412619 .0080522 -.0664707 .0545522 .0232724 -.3740906 .1789101 .859613 .1901634 .8656415 -.0144547 .6558612 .5034283 .8505432 .4388555 .5588812 .0717169 -.1091005 .1846368 -.1963089 -.8721172 .0709591 .0154445 .2082122 .116554 .1644927 .0799986 .0877686 .0746339 .103184 .0868145 .7978629 .4096796 .2706406 .0525622 .106418 .0042136 .0486497 .048478 .0630228 .0743561 .1175216 .0779615 .0865235 .0858416 .0361288 .3174289 -0.83 -1.37 -2.81 -0.75 0.01 0.52 0.09 -0.89 0.53 0.27 -0.47 0.44 3.18 3.62 8.13 -3.43 13.48 10.38 13.50 5.90 4.76 0.92 -1.26 2.15 -5.43 -2.75 0.408 0.171 0.005 0.456 0.988 0.606 0.927 0.373 0.597 0.789 0.639 0.662 0.001 0.000 0.000 0.001 0.000 0.000 0.000 0.000 0.000 0.358 0.207 0.031 0.000 0.006 -.1977564 -.051397 -.9935377 -.3154069 -.3199627 -.1155324 -.163971 -.2127506 -.1476848 -.1468809 -1.937873 -.6240471 .3291673 .0871435 .6570662 -.0227133 .5605095 .4084132 .7270208 .2931203 .328543 -.0810848 -.2786835 .0163903 -.2671201 -1.494266 .0803983 .0091444 -.1773608 .1414766 .3248368 .1980562 .1800755 .0798091 .2567892 .1934257 1.189692 .9818674 1.390059 .2931834 1.074217 -.0061962 .7512129 .5984434 .9740657 .5845908 .7892193 .2245185 .0604824 .3528833 -.1254977 -.249968

remitd | lacres | srate | mroad | bankce | market | agrext | agcoop | aglsel | agshar | hnpape | htelev | hradio | hedu | hsex | hage | age5_14 | age15_24 | age25_39 | age40_59 | age60 | agfert | aginse | pubtra | seg | _cons |

-------------+---------------------------------------------------------------/lns0 | /lns1 | /r0 | -.3381478 -.6326877 1.124312 .065029 .015213 .1535879 -5.20 -41.59 7.32 0.000 0.000 0.000 -.4656023 -.6625046 .8232857 -.2106933 -.6028707 1.425339

30

/r1 |

.6861827

.0840718

8.16

0.000

.521405

.8509605

-------------+---------------------------------------------------------------sigma0 | sigma1 | rho0 | rho1 | .7130899 .5311623 .8090637 .5955241 .0463715 .0080806 .0530517 .0542558 .6277569 .5155584 .6768543 .4787837 .8100225 .5472384 .8907074 .6915709

-----------------------------------------------------------------------------LR test of indep. eqns. : chi2(2) = 71.77 Prob > chi2 = 0.0000

------------------------------------------------------------------------------

31