Welfare effect of rice outgrower scheme participation: empirical evidence from northern Ghana

Abstract

Outgrower schemes can improve farmers’ welfare by boosting farm productivity and increasing market participation. In this context, we examined the effect of participating in outgrower schemes on household welfare indicators while controlling for potential observed and unobserved biases that could influence the outcomes. To address this objective, we employed an endogenous switching regression model to analyze primary data from 555 rice farmers in northern Ghana who use irrigation. The results revealed significant effect of sex of household’s head, age, marital status, education, dependency ratio, non-farm work, extension contact, access to credit, membership of farmer group, proximity to commercial markets, distance to outgrower schemes, familiarity with scheme operations, and the geographical location of the farmer on the propensity to participate in outgrower schemes. Importantly, participation in outgrower schemes resulted in a 57.6%, 23.6%, and 48.1% increase in household consumption expenditure per capita, income per capita, and asset ownership, respectively, exceeding what participants could have gained if they had not participated. Similarly, the non-participants, would have experienced a 21.2%, 34.0%, and 26.1% increase in household consumption expenditure per capita, income per capita, and assets, respectively, if they had joined the scheme Therefore, strategies to improve farmer groups and extension services are required as they are critical channels for encouraging more farmers to participate in the schemes and thereby improving their welfare.