Trade liberalisation and poverty: empirical evidence from household surveys in Ghana

Abstract

PurposeDrawing first on stylised facts, the purpose of this paper is to isolate the impact of trade liberalisation policies pursued for the past two decades on poverty in agricultural households in Ghana.Design/methodology/approachTwo samples of agricultural households are drawn from the most recently published Ghana Living Standards Survey. Using terms of trade as a channel of the reforms, an econometric estimate of the impact of terms of trade on per‐capita expenditure, of these agricultural households, is run on both samples using two cross‐sectional models.FindingsThe results suggest that trade liberalisation had an adverse welfare impact on agricultural households immediately after the reforms‐1992; however, trade positively influenced welfare much later‐1999. Even though agricultural producers' terms of trade have improved they still constitute the largest segment of the poor in Ghana.Research limitations/implicationsTargeted trade policy instruments are required to positively impact mainstream agricultural households in poverty alleviation efforts. The absence of repeated cross‐sections in the Living Standards Survey limits the possibility of exploring dynamic effects.Originality/valueThis paper isolates welfare effects of trade on agriculture households in Ghana – a departure from previous studies which examine the effect of trade on all households. This distinction is important since welfare effects of trade in Ghana are more likely to impact households whose livelihoods depend on agriculture than on other households.