Migrant remittances and consumption expenditure under rain-fed agricultural income: micro-level evidence from Ghana

Abstract

Using a repeated cross-section data set from Ghana for 1991/1992, 1998/1999, 2005/2006, 2012/2013 and 2016/17, and a Two-Stage Least Squares estimator, this paper investigates the effect of agricultural income on remittances and consumption expenditure. It is found that households in Ghana use remittances to protect themselves from decline in agricultural income due to rainfall failure. The results suggest that a 100 Ghana Cedis decrease in agricultural income leads to a 30 Ghana Cedis increase in remittances. The results further posit that rainfall-induced agricultural income changes affect total consumption and food expenditures of rural households. A 100 Ghana Cedis decrease in agricultural income due to rainfall failure leads to a 60 Ghana Cedis fall in total consumption expenditure, and 36 Ghana Cedis fall in food expenditure of rural households. Very poor households in rural areas are found to be more vulnerable to such rainfall-driven agricultural income changes.