Working Paper
Effect of non-farm work on agricultural productivity

This paper investigates the factors influencing participation in non-farm work and the effect of participation on farmers’ productivity, using survey data from 300 smallholder farm households in northern Ghana. The study employs an endogenous switching regression model to address selection into non-farm work, and a treatment effects model to measure the effect of participation on productivity.

Factors determining participation in off-farm activity include the head of household’s gender and years of formal education, the location of the farm, ownership of cattle, and the dependency ratio. Factors affecting productivity include gender, years of formal education, farm size, location of the farm, access to credit, herd ownership, and degree of specialization in rice production. Results from a treatment effects model indicate a positively significant effect of non-farm employment participation on farm productivity.

Income diversification therefore remains an important livelihood strategy among smallholders, and earnings from off-farm work enable smallholders to improve their yields.