Abstract
Participation of farm households in off-farm work has gained prominence in recent times as an income diversification strategy. The effect of off-farm work on farm income is however unclear. This paper therefore sought to provide empirical evidence of the income effect of off-farm activity participation using a cross section of maize farmers in Tolon District of Ghana as a case study. In order to account for sample selection bias, the Heckman selection model was used to estimate the factors influencing participation in off-farm work and the determinants of farm income. Furthermore, the study employed propensity score matching to evaluate the impact of off-farm work on farm income. The results indicate that participation in off-farm work is influenced by sex, age, and years of formal education of the respondent, farm size, and number of dependents while farm income is influenced by age of the respondent, farm size, and access to credit. In addition, the result of the propensity score matching revealed that participants in off-farm work increased their farm income by at least GH¢ 1702 as a result of income diversification. The rural economy therefore provides off-farm and on-farm linkages that enhance farmers’ income from agriculture. The creation of employment opportunities outside the farm will therefore complement on-farm work and enhance income from farming.
Highlights
Most developing countries including Ghana depend on agriculture as an importance source of livelihood
Results of the Heckman Selection Model. e results of the Heckman selection model are presented in Table 4. e log-likelihood ratio (LR) test is significant at 1% indicating the presence of selection bias, which justifies the use of the Heckman model to correct for the bias
Factors Influencing Participation in Off-Farm Activities. e estimates of the factors influencing participation in off-farm work using the Heckman selection model are presented in Table 4. e study indicates that the likelihood of maize farmers to participate in off-farm work is affected by age, sex, education, and total agricultural land
Summary
Most developing countries including Ghana depend on agriculture as an importance source of livelihood. As demonstrated by Mishra and Goodwin [12], farm households may depend on off-farm work to stabilize household income because farm commodity prices are more variable than off-farm wages It is expected from the theory of production that a risk-averse farmer will choose to allocate labour and other resources to activities that are less risky to the point where the expected marginal returns are equal for the different activities. Several studies allude to a positive effect of off-farm work on agricultural productivity, food security, and household income of farm households [16,17,18]. E paper contributes to the literature on income diversification and its effects on household welfare by empirically estimating the magnitude and direction of impact of off-farm work on farm income of smallholder farmers.
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Free) 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
