Internal remittances and employment choices in rural Ghana

Abstract

PurposeThe paper examines the effect of internal remittances on the employment choices of household heads in rural Ghana.Design/methodology/approachThe paper employs data from the Ghana Living Standards Survey (GLSS 6) of the Ghana Statistical Service. Due to issues of endogeneity of remittances in relation to labor supply, the paper adopts an instrumental variable approach in the analysis. First, employment choices are categorized into three: (1) wage/salary employment, (2) self-employment and (3) domestic/family employment. The relationship is then modeled as instrumental variable multinomial probit (IV-MNP). Secondly, employment choices are recategorized into two: farm employment and otherwise and modeled as instrumental variable probit (IV-PROBIT). The models are estimated via the conditional mixed process (CMP) estimation technique.FindingsThe results indicate that remittances have a negative effect on self-employment and a positive effect on domestic/family employment. Thus, remittances reduce participation in self-employment but increase participation in domestic/family employment. Furthermore, remittances have a negative effect on participation in farm employment. The results are robust to different measures of remittances: receipt of remittances (dummy) and remittance income.Practical implicationsThe results suggest that remittances are used for consumption rather than investing in earning activities. In general, engaging in earning type of employment, whether farm and nonfarm employment will decline with receipt of remittances in rural Ghana. There is a need for policy attention with the increasing migration of people out of rural areas.Originality/valuePrior to this study, little was known on the effect of internal remittances on labor supply decisions of remittance recipients in Ghana, particularly rural Ghana. This paper contributes significantly to filling this knowledge gap.

Rural youths' choice of livelihood strategies and their effect on income poverty and food security in Rwanda

“…As indicated in Table 3, the most rewarding strategy, i.e., non-farm wage, is less practised because it is faced with entry barriers related to educational qualifications and access to financial resources. Previous studies by Dary and Yazidu (2020), Ibidunni and Daniel (2020) and Kangondo (2020) also found that non-farm wage earners are better off in rural areas than when using other livelihood strategies.…”

“…This is evidenced by the seminal works of Cho and Kim (2017), Holden (2018), Challa et al. (2019), Kangondo (2020), Dary and Yazidu (2020), Bellon et al. (2020) and Abera et al.…”

“…Livelihood studies in developing countries (Etea et al, 2019;Teshager et al, 2019;Salam, 2020) have recently received academic attention especially on how the rural youth chooses livelihood activities. This is evidenced by the seminal works of Cho and Kim (2017), Holden (2018), Challa et al (2019), Kangondo (2020), Dary and Yazidu (2020), Bellon et al (2020) and Abera et al (2021). Generally, these studies show that rural youths are facing high unemployment due to a myriad of infrastructural and capital constraints.…”

Domestic Remittances and Household Food Diversity in Rural Ghana

“…However, household strategies of migration and remittances have been found to be not sufficient to alleviate the food insecurity situation in some parts of Northern Ghana (Atuoye, Kuuire, Kangmennaang, Antabe, & Luginaah, 2017). Nonetheless, non-farm work income positively affects household food security in Northern Ghana (Owusu, Abdulai, & Abdul-Rahman, 2011) and rural Ghana remittance-recipient households use their remittance income for consumption (Dary & Ustarz, 2020). In terms of the determinants of domestic migration, Anarfi, Kwankye, Ababio, and Tiemoko (2003) suggested that urban-rural income differentials and the results of imbalanced socio-economic development and lopsided resource allocation between Northern and Southern Ghana affect internal migration.…”

Ghana Poverty Assessment

“…COVID is also expected to have reduced remittances. An estimated 27 percent and 32 percent of the bottom 20 and top 20 households respectively received remittances in 2016 and used it for consumption, rather than investment (Dary and Ustarz 2020). Thus, a drop in remittance income will directly reduce household consumption unless it can be offset by other income sources.…”