Determinants of Off-Farm Income among Smallholder Rice Farmers in Northern Ghana: Application of a Double-Hurdle Model

Hindawi Advances in Agriculture Volume 2019, Article ID 7246176, 7 pages https://doi.org/10.1155/2019/7246176 Research Article Determinants of Off-Farm Income among Smallholder Rice Farmers in Northern Ghana: Application of a Double-Hurdle Model Benjamin Tetteh Anang 1 2 1 and Richard W. N. Yeboah2 Department of Agricultural Economics and Extension, Faculty of Agriculture, University for Development Studies, Tamale, Ghana Department of Agribusiness Management and Finance, Faculty of Agribusiness and Communication Sciences, University for Development Studies, Tamale, Ghana Correspondence should be addressed to Benjamin Tetteh Anang; Received 16 May 2018; Revised 26 December 2018; Accepted 30 December 2018; Published 13 January 2019 Academic Editor: Innocenzo Muzzalupo Copyright © 2019 Benjamin Tetteh Anang and Richard W. N. Yeboah. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. Income diversification by farm households has gained the attention of researchers and policy makers due to its commonness especially in developing countries. This study sought to empirically investigate the determinants of off-farm income among smallholder farmers in northern Ghana using a sample of 300 rice farmers. A double-hurdle model was used to determine the factors influencing participation in off-farm work as well as the predictors of actual amounts earned from working outside the farm. The results revealed that gender, farming experience, years of education, and access to credit are the factors determining participation in off-farm work while farming experience, years of education, and geographical location are the determinants of income from off-farm work. The paper concludes that measures to enhance rural income diversification will spur the rural economy and these measures should seek to address the problem of low level of formal education in rural areas. 1. Introduction Majority of the world’s poor live in rural areas in developing countries and depend on agriculture and its related activities as a source of livelihood. Despite the dependence on agriculture in these countries, including Ghana, the agricultural sector continues to grapple with challenges that impede its growth and contribution to socioeconomic development. These challenges include dwindling budgetary allocation to the agricultural sector, farmers’ inability to acquire and replace farm equipment, inadequate credit sources, among others. In the wake of the dwindling fortunes and challenges facing agriculture in most developing countries, the rural offfarm sector has emerged as an important source of livelihood [1–4]. Income diversification by farm households has gained the attention of governments, policy makers, and researchers because of its commonness and contribution to socioeconomic development especially in developing countries. The role of the off-farm sector in employment creation, income generation, farm expansion, and poverty reduction especially in developing countries is well documented (see, for example, [3, 5–7]. According to [2], farm households diversify their income sources by allocating productive resources among diverse income generating activities including farm and off-farm work. Diversification may be a deliberate household strategy or a spontaneous response to crisis as noted by [8]. It may serve as a safety net for the poor whereas for the rich it may be a means of accumulation. Income diversification by farm households may also be attributed to dwindling and uncertain farm incomes, rising poverty, and emerging opportunities for off-farm work. Off-farm activities involve participation in remunerative work outside the participant’s own farm and have been recognised to play an increasingly essential role in sustainable development and poverty reduction particularly in rural areas [9]. Income from off-farm work supplements onfarm income and helps to expand economic activity and 2 employment opportunities in rural areas. For the agricultural sector, income from off-farm activities is an alternative source of income which may be used to finance agricultural production. Income diversification therefore has the potential to increase farm investment leading to higher productivity. Off-farm activities also reduce income uncertainty. As noted by [10], employment diversification helps households to smooth income through the spread of risks across different activities. The reduction in income uncertainty opens up opportunities to invest in improved production technologies to enhance agricultural production. Income diversification as a livelihood strategy is considered a global phenomenon. According to [11], income from nonfarm work contributes 40% to total income in Latin America while, in sub-Saharan Africa, nonfarm income constitutes between 30% and 42% of total household income. According to [12] the estimated share of nonfarm income in total household income for Asian countries ranges between 29% and 32%. Agriculture’s contribution to the provision of livelihood opportunities in most rural areas cannot be overemphasized. However, recent structural transformation in the economies of most countries has seen faster growth in other sectors of the economy like manufacturing, industry, and the service sector, leading to a decline in the contribution of agriculture to rural livelihoods and gross domestic product (GDP). Agriculture therefore cannot be the only source of livelihood for many rural farm households, hence the significance of off-farm enterprises to rural incomes and employment creation. For example, [13] highlighted the need for the integration of activities such as nutrition gardening, livestock rearing, product diversification, and related income generation activities as a means of improving household food and nutritional and income security among farmers in India. An important factor determining employment of rural people in nonagricultural enterprises is level of education. The level of education in most rural areas of developing countries is lower than what prevails in urban areas, which makes rural people less likely to be employed in highpaying jobs in nonagricultural enterprises. Education is also an important factor in the decision to participate in offfarm work. Education improves the human capital and the likelihood to engage in high-paying nonagricultural jobs. Less educated individuals without the requisite skills and technical knowhow may find it difficult to participate in many nonagricultural jobs that require specific skills and expertise. This may impede participation of less educated rural folks in the nonfarm labour market. As indicated by [1], better education is one of the most important factors affecting offfarm earnings. Similarly, [14] reported that less educated households in rural Nigeria were lim (...truncated)