Agricultural productivity growth and economic development in an open economy: The case of Ghana

Reducing poverty in sub-Saharan Africa will entail the movement of people out of quasi-subsistence agriculture, the sector in which most of the poor currently earn their livelihoods. This structural transformation can occur both through improving productivity in smallholder farms and creating opportunities elsewhere in the economy, whether in agriculture or non-agriculture. This project will examine the potential for structural transformation, through different strategies, in Ghana. Past research has argued that many countries in Africa are effectively closed because of geographic isolation, for instance, or high transportation costs. Such economies may benefit from increased productivity of staple food crops. Not all sub-Saharan countries fit this description, however. Ghana is a coastal economy with relatively good access to international markets, such that it can import food staples and export high-value agricultural commodities. In this context, structural transformation could follow different paths. It might involve improvements in staple food production, or be driven by exports of agricultural goods or the development of the non-agricultural sector. Our project will model an economy similar to Ghana and ask the following questions. How would we expect the economy to respond to increases in the productivity of staple food crops like rice, maize, cassava, sweet potato, yam and cocoyam, in terms of the allocation of labour across sectors and regions? How much would we expect average incomes and living standards to change? How would we expect the economy to respond to increases in the productivity of horticultural crops and other non-staple foods, primarily intended for export? How would we expect the agricultural economy to respond to a sudden expansion of the non-agricultural sector such as an oil boom? And finally, what would be the anticipated effects on commercial agriculture, subsistence agriculture, and the overall standard of living? Our project will connect these policy debates – all under active discussion in Ghana – with frontier academic research. Macro perspectives offer a valuable accompaniment to the micro development literature on project-level impacts, such as studies on the impact of modern variety adoption or fertilizer use. Our project can shed light on long-run growth dynamics and explore how some interventions might (or might not) scale up effectively. We hope to deliver useful and relevant research results useful to Ghana’s government, along with interested non-governmental organizations, donors, and scholars.

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