Identifying key policy options for growth and gainful employment in Ghana

Farm inputs subsidies have been a major component of agricultural sector policies in many developing countries, including Ghana. In this study, we examine the economy-wide impact of the fertiliser subsidy programme in Ghana with a focus on agricultural sector productivity, overall economic growth, employment, and welfare. We adopt a modified version of the standard PEP-1-t model. Our results suggest that the fertilizer subsidy programme improves GDP growth and sectoral productivity, notably, the main agricultural sub-sectors and the food industry. Specifically, compared to the business as usual scenario, the implementation of the fertilizer subsidy programme improves the productivity of the maize, sorghum and rice sub-sectors by about 8.3%, 4.5% and 3.8%, respectively, in 2017. These impacts are however about four-times, three-times and six-times higher in 2020 than their 2017 levels, respectively. Also, we observe important positive impacts on the value added of the food industry, indicating the presence of a backward linkage with the agricultural sector. The unemployment rate among skilled labour (except urban skilled labour engaged in agricultural activities) falls under the programme and the decline in unemployment is relatively more pronounced for rural skilled labour engaged in nonagricultural activities. In addition, we find evidence of positive impacts on household consumption and hence on welfare. Based on these findings, we recommend that the fertilizer subsidy programme should be implemented as planned and if possible extended beyond its planned implementation period. JEL: C68; D24; I32; Q18.