Farm and Non-Farm Linkages at the House- hold Level in Rural Ghana: A Consistent Stochastic Distance Function Approach

Gustavo Anríquez, Silvio Daidone

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This article explores the effects within households of an expanding rural nonfarm (RNF) sector in Ghana. We ask whether the growing RNF sector allows for economies of diversification within farms, how it affects household input demands, and whether it has measurable effects in overall household production efficiency. We explore the intrahousehold linkages between agricultural and RNF activities, first assuming perfectly competitive input and output markets and then with market failures, in particular missing labor and credit markets. We then measure these linkages using a household level input distance function, finding high levels of inefficiency in Ghanaian farms. Also, there are cost-complementarities between the RNF sector and the agricultural sector, particularly with food crops in which the poorest tend to specialize. The expansion of the RNF sector increases demand for most inputs including agricultural land. Finally, we show that smaller farms tend to be more efficient, and that RNF output is helping the farm household to become more efficient, but the latter result is not robust.
Original languageEnglish
Pages (from-to)51
Number of pages66
JournalAgricultural Economics
Issue number1
Early online date7 Jan 2010
Publication statusPublished - Jan 2010


  • Rural nonfarm sector
  • Input distance function
  • Cost complementarities
  • Technical efficiency
  • Ghana

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