Income Diversification and Poverty in a Growing Agricultural Economy: The Case of Ghana

This paper analyses changes in income portfolios of rural households and its

determinants for the case of Ghana in the 1990s. Our analysis shows that, contrary to

common beliefs, rural Ghana has seen major economic transformation, as households

increasingly diversify their livelihoods by both increased migration and more local

non-farm employment. These diversification decisions seem to be driven to a large

extent by desperation rather than new opportunities, in particular with regard to

migration. Low-income households increase their income share in particular from

local non-farm activities through more participation while returns to diversifying

activities stagnate or even decrease. Therefore households with a low non-labour

asset-base are increasingly diversified and poor. In contrast, asset-rich households are

more successful at either diversifying or specialising in those activities the household

is relatively good at. They also tend to benefit more from agricultural growth.