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Item Essays on Fiscal Policies and Income Redistribution(University of Ghana, 2019-08) Appiah, E.S.The increasing rate of income inequality across the globe has generated a growing public support for income redistribution. Most governments usually employ fiscal policies as the main instruments to redistribute income. Despite the recognition that fiscal policies play a central role in addressing income inequality, empirical studies on this subject is very limited. The thesis addressed three main issues: the first study conducts an ex-ante evaluation analysis on the redistributive impact of a hypothetical child support grant financed with domestic tax revenues; the second study examines the determinants of income redistribution and the third study investigates the impact of cash transfers on the intra-household labour market decisions of beneficiaries. The first objective of the thesis seeks to examine the redistributive impact of a hypothetical child support grant financed with direct tax revenues. The Ghana tax-benefit microsimulation model (GHAMOD) was used to perform all the simulations. The magnitude of redistribution was derived by measuring the change in the inequality measure before and after taxes or transfers. In assessing the progressivity of the transfer, the study employed both concentration curves and concentration indices. Since the pursuit of equality in income distribution also involves poverty reduction, the study also examined the impact of this policy on poverty rate. Three policy scenarios were examined: a targeted child support grant; a universal child support grant with flat benefits and lastly, a universal child support grant with differentiated benefits. The following conclusions were drawn based on the simulations: a universal child support grant with differentiated benefits was the most effective child benefit scheme to reduce inequality and poverty even though it the costliest scheme. Generally, the results showed a trade-off between the fiscal cost and the extent of inequality reduction. The results also confirmed that the extent of redistribution does not only depend on the extent of progressivity of the cash transfer but also depends on the size or the magnitude of the transfer. Again, the simulations for the income tax reform indicated that increasing the tax rate for the top income bracket provides an avenue of raising revenue to fund the proposed programme and also ensures that the ultimate goal of income redistribution is achieved. The second research objective seeks to examine the factors that influence the extent of redistribution that can be achieved with a given set of taxes and benefits policies. It first tested the validity of the median voter theorem since many empirical studies have produced inconsistent results. Secondly, the study accounted for other factors that have the potential of affecting the impact of redistributive policies. The econometric technique used for the analysis was the system GMM. The outcome of the study confirmed the validity of Meltzer-Richard median voter hypothesis. Furthermore, the extended baseline regression models shown that, a country’s income level, fertility rate and trade openness positively affect the extent of redistribution. The degree of democratisation, on the other hand, negatively affect redistribution. Lastly, the third research objective evaluates the impact of cash transfers on intra-household labour market decisions of beneficiaries using the Livelihood Empowerment Against Poverty (LEAP) programme as a case study. The study assessed how household bargaining affect the labour supply decisions of couples who received the LEAP grant. For the impact evaluation analysis, the study employed difference-in-difference with inverse probability weighting (DD-IPW). All the regression models showed that cash transfers did not significantly affect the labour supply of couples. Women’s bargaining power turned out to be significant and positively affected the labour market decisions of couples.Item Banks, Financial Inclusion and Household Welfare in Ghana(University Of Ghana, 2018-12) Iddrisu, A. M.This thesis consists of three stand-alone empirical papers on the drivers and welfare effects of financial inclusion in Ghana. The first empirical paper (Paper I), presented in Chapter two of the thesis, examines the effect of access to credit on household welfare using a pseudo panel data set spanning the period 1991/92 – 2012/13. In addressing the welfare effects of access to credit, Paper I examine, specifically, the effect of access to credit on several measures of household welfare including total household consumption expenditure per adult equivalent and household food expenditure per adult equivalent. Also, the study examines the potential variations in the effect of access to credit on the welfare of households at different levels of welfare. Finally, the study investigates the mediating role of the gender of the household head in the effect of access to credit on household welfare. Empirical estimation techniques employed in this paper include the errors-in-variables, the weighted least squares and the dynamic generalised method of moments estimators. The main empirical results of the paper suggest that access to credit has a beneficial effect on household welfare; this is true regardless of the measure of household welfare used. Specifically, the alleviation of households’ credit constraints does not only enhance household consumption, more importantly, it reduces their likelihood of falling into poverty as well as the extent of poverty and the degree of inequality among the poor. The positive effect of access to credit on household welfare is however heterogeneous across gender and levels of household welfare. In this vein, the study finds that the welfare effect of access to credit is higher for female-headed households than for male-headed households. As well, access to credit benefits the poor more than the rich, indicating that access to credit could be a source of convergence in welfare across households. The results of this paper are robust to the measure of household welfare, the control for endogeneity and changes in the data structure. Chapter three presents the second empirical paper of the thesis (Paper II). The study examines the effect of financial inclusion on household welfare using a cross-sectional household survey data set drawn from the sixth round of the Ghana Living Standards Survey (GLSS). Specifically, the paper first computes a multidimensional index of financial inclusion and then examine the effect of financial inclusion on household welfare. Robust estimation approaches including the Ordinary Least Squares, the Binary Probit and the Propensity Score Matching estimation techniques are utilised in this paper. The main findings of the study are as follows: first, the study’s empirical results suggest strongly that financially deprived households have lower levels of welfare compared to their financially included counterparts; this finding is robust to the use of different measures of household welfare. Second, we observe that poor households experience much larger welfare effects of financial inclusion relative to non-poor households. This indicates that financial inclusion does not only improve household welfare, but it may also help to reduce income inequality. Finally, on the possible channels through which financial inclusion might influence household welfare, we show that financial inclusion influences household welfare via its effect on households’ farm and non-farm enterprise incomes. The results of the study are robust to alternative measurements of the financial inclusion index, to the use of different cut-off points and to the control for endogeneity and self-selection bias. Chapter four presents the third empirical paper of the thesis (Paper III). Paper III examines, specifically, the role of banking system penetration on financial inclusion in Ghana using a three-period district-level panel data set over the period 1999 – 2013 whilst exploiting the change in the policy which guides banking operations in Ghana. Both the ordinary least squares and the instrumental variables estimators are used in this paper. The study elicits the following findings: first, we show that the switch from the compartmentalised system of banking to the universal banking system in Ghana has resulted in an expansion of banks’ branch network which has benefited hitherto financially less developed districts, although branch expansion into financially more developed districts continues unabated. Second, our instrumental variable evidence suggests that banking system penetration promotes financial inclusion in terms of access to bank and formal credit. The empirical results of the thesis point to the fact that improving the level of financial inclusion is a plausible tool that can be deployed towards the realisation of the Sustainable Development Goals, notably, the reduction in the incidence of poverty and vulnerability as well as inequality. Consequently, we recommend that policies that seek to promote meaningful access to financial services by all (especially, those that seek to deepen the extent of bank branch penetration and the roll-out of innovative financial products/services) must be strengthened. Keywords: Financial Sector Development, Financial Institutions, Formal Banks, Bank Branch Expansion, Banking System Penetration, Financial Inclusion, Financial Exclusion, Financial Deprivation, Household Welfare, Poverty, Inequality, Pseudo Panel, Access to Credit, Credit Constraint, Difference-in-Differences, Instrumental Variables, Propensity Score Matching, Errors-in-Variables, Ghana.Item Inequality of Opportunity, Economic Inequality and Poverty in Ghana(University Of Ghana, 2020-08) Gafa, D.W.A.This thesis examines the trend and patterns of inequality of opportunity for consumption expenditure and its association with poverty in Ghana. Using the 1998/99, 2005/06 and 2012/13 rounds of the nationally representative Ghana Living Standard Survey, the study first provides the parametric and non-parametric lower-bound estimates of inequality of opportunity for consumption expenditure over time, across sex and area of residence. The study uses five circumstance variables, namely, mother’s education, father’s education, parents’ occupation, region of birth and ethnicity. The findings show that the parametric (non-parametric) estimate of inequality of opportunity decreased from about 34 to 30 percent (23 to 19 percent) between 1998/99 and 2012/13 despite the increase in consumption inequality over the same period. The study then decomposes inequality of opportunity into the relative contribution of each circumstance and finds that the fall in disparities of opportunity over time is driven by the decrease in the relative contribution of ethnicity and north-south place of birth, especially in urban areas. Furthermore, the study reveals a higher opportunity gap in rural areas than urban, and among male-headed households than female. Secondly, the thesis investigates the nature of the north-south opportunity divide in Ghana. By estimating the level of inequality of opportunity in the northern and southern Ghana, the results unveil greater inequality of opportunity in the north compared to the south. This finding is attributed to the higher level of development as well as the availability of better economic opportunities in the latter compared to the former. The study also finds that the effect of circumstances on outcome is mainly direct rather than indirect through effort variables such as education, number of hours worked, migration and household composition. Using the opportunity profile, the least-advantaged group with respect to opportunities in Ghana are identified to be people whose father has no more than primary education and whose parents have been into farming activities most of their lives. The study further shows through the analysis of poverty profiles that the opportunity-deprived group is characterised by greater level of poverty, especially in the northern part of Ghana. This finding suggests that opportunity-deprivation may be related to poverty in Ghana. Furthermore, by examining the determinants of poverty in the opportunity-deprived group, the study shows that education as well as occupation of household members play an important role in moving a household out of poverty, especially when the household head is from the least-advantaged category. In addition, residing in a district with high employment prospects and low fertility may save households from poverty, particularly in northern Ghana. Finally, the study unveils the existence of considerable heterogeneities across districts in the levels and the progress on poverty, consumption inequality and inequality of opportunity. The result also showed that there is a positive and significant correlation between inequality of opportunity and poverty, and between inequality of opportunity and inequality of outcome. Surprisingly, the analysis reveals no association between the changes in inequality of opportunity and poverty reduction. Meanwhile, changes in consumption inequality are found to be positively correlated with changes in inequality of opportunity, suggesting that providing equal opportunities may help reduce outcome inequality in Ghana.Item Essays on Foreign Direct Investment in Sub-Saharan Africa(University of Ghana, 2019-07) Edmund, K.This thesis comprises of five chapters with three empirical papers on essays on foreign direct investment (FDI) in SSA. The first empirical paper investigates the geographical determinants of FDI, while controlling for resources, market, efficiency and institutional factors in Sub-Saharan African (SSA) from 2002 to 2016. To achieve this objective, a panel data consisting of a sample of 40 SSA countries was estimated using Hausman-Taylor estimation technique. To check for the robustness of the results the sample was split into South and East, and West and Central SSA countries and further into regional and resource rich and non-resource rich countries. The estimation results indicate that the coefficient of geographical area in Km2 is positive in the full sample and the subgroups. The coefficient of location in tropics exerts a positive and significant effect on FDI in the full sample while the coeficient of distance from the sea is negative and significant in the full sample and the West and Central SSA countries. With regard to geographical variables, regional analysis shows that the results obtained in the West and Central subgroup is influenced by countries in Central Africa and the results in the South and East subgroup is mainly propelled by countries in Southern Africa. The coefficient of market size (per capita GDP) is positive and significant in the South and East SSA countries confirming the market seeking hypothesis. For resource seeking variables, the coefficient of natural resource rent is significant in South and East African countries. In addition, the coefficient of investment in infrastructure measured by fixed telephone subscription is positive and significant in the full sample and the West and Central SSA countries. Geographical size of the country was found to attract FDI in both resource rich and resource poor countries. However, greater distance to the sea was found to limit FDI flows in resource rich countries but exert no effect in resource poor countries. The study recommends that SSA countries should take advantage of their geographical size to come out with a common market to maximize the potential in FDI. The second paper examines the effect of FDI and absorptive capacities on economic growth for 36 Sub-Saharan Africa (SSA) countries spanning the period 1998 to 2016.The hypothesis is that for FDI to propel growth, adequate absorptive capacities such as financial market development that accounts for fragility, and economic freedom should be present in the host country. A key point of departure from other studies is that while our financial market data accounts for market fragility, our economic freedom data also uses the overall score of all indicators of economic freedom. Using the Fully Modified Ordinary Least Squares (FMOLS) technique, the results indicate that FDI promotes economic growth in the presence of adequate host country’s absorptive capacities in the full sample. However, in the absence of these absorptive capacities, FDI could retard economic growth. Moreover, FDI promotes growth in middle income and resource rich countries but hurts growth in low income countries and exert a negative but insignificant effect in resource poor countries in SSA. Thus, efforts should be geared towards the recognition and building of adequate absorptive capacities that can convert the spillover effect of FDI into tangible growth. The third paper examines the differential effects of sector level FDI on carbon dioxide emissions in SSA from 1990 to 2016. Using system GMM estimation technique, the results show that FDI in agriculture and services reduce carbon dioxide emissions whereas FDI in industry pollutes the environment. However, the coefficients of the value added from the various sectors exert no significant effect on carbon dioxide emission. Domestic investment exerts a negative effect in the services sector whereas financial market development exerts a positive effect in the services sector but both exert no effect in agriculture and industrial sectors. The coefficient of urbanization was found to be positive and significant in agriculture and industrial sectors. Finally, an inverted U-shaped Environmental Kuznet Curve (EKC) was found in the industrial sector while in agriculture and service a U-shaped EKC was found. The study recommends the formulation and implementation of sound economic policies towards attracting more FDI into agriculture and service sectors so as to gain from the advantages associated with transfers of cleaner technology. Furthermore, policy makers should be more circumspect and concentrate more on revising their environmental laws regarding investments in industry.Item Ghana’s Export Performance: The Role of Exchange Rate Volatility, Exchange Rate Policies and Challenges to Export Diversification(University of Ghana, 2019-12) Owusu-Afriyie, E.The thesis is divided into three empirical papers to address the core issues regarding the main drivers of Ghana’s export performance both at the macro and micro levels with focus on the role of exchange rate volatility and exchange rate policies, and the constraints to Ghana’s export diversification effort by examining its economic complexity levels as well as the product space and the prospects for structural transformation. The empirical chapter one, titled “Ghana’s Export Performance: The role of Exchange Rate Volatility and Exchange Rate Policies” investigates the heterogeneous responses of the various components of total export (cocoa beans export, natural resources export, and nontraditional export) to exchange rate volatility and exchange rate policies. By using a linear ARDL technique on quarterly data for the period 2000 to 2016, the impact of exchange volatility on total export and its components is not statistically supported in the immediate short run. On the contrary, the results from a non-linear ARDL technique that decouples the exchange rate volatility into negative and positive effects suggest that a negative short-run response of non-traditional export and total export to negative exchange rate volatility (excessive depreciation) is statistically supported in Ghana. Besides, the results from the nonlinear ARDL suggest that exporters of natural resources (gold, crude oil, and other minerals) respond positively to positive exchange rate volatility (excessive appreciation) in the short run, which could be attributed to their ability to secure risk mitigating schemes. This may have implications for capital outflows if appropriate measures are not instituted to check the orderly transfer of profits by owners of the capital used for the exploitation of these natural resources, who tend to be foreigners. However, neither the linear nor the non-linear ARDL techniques statistically support a response of cocoa beans export to exchange rate volatility in the immediate short run. This outcome may be attributed to the protection offered against short term risk due to the marketing arrangements established by the Ghana Cocoa Board over the years. In the long run, the results from both the linear and non-linear ARDL techniques provide evidence in support of the argument that exchange rate volatility depresses non-traditional export performance. The outcome is however different for total export conditioned on whether the linear or the non-linear ARDL technique is applied. On the role of exchange rate policies, results from the ARDL techniques support the argument that an increase in anti-export bias policies undermines the performance of non-traditional export, which is not the same for natural resources and total export. Cocoa beans export appears not to be adversely affected due to the protection that cocoa farmers enjoy from the purchase’s arrangements established by the Ghana Cocoa Board. The empirical chapter two, with the title “Ghana’s Economic Complexity and Product Space: Implications for Export Diversification” assesses the fundamental challenges confronting Ghana’s quest to achieve a more diversified export base. The study is anchored on the theoretical arguments of Hausmann, Hwang and Rodrik (2007) and Hidalgo, Klinger, Barabási and Hausmann (2007) that the nature of the products, constituting a country’s export basket, which reflects the productive capabilities acquired over the years, matters a lot in any diversification effort. Hence, the study employs the concepts of Economic Complexity Index (ECI) and Product Complexity Index (PCI), Product Space and Revealed Comparative Advantage (RCA) generated based on trade data at the HS 4-digit classification level for 1240 products, for the period 1995 to 2016, to undertake comparative analyses between Ghana and some selective countries (Nigeria, Singapore, and Malaysia) to address the question relating to why Ghana’s export basket is less diversified. The study also examines sectors that have emerged from the products that the country has established a comparative advantage and how that has contributed to its structural transformation effort. The study further identifies new products of strategic value that Ghana can easily deploy its acquired productive knowledge to promote future export diversification efforts and at the same time develop such products for the ECOWAS market. The study provides evidence to show that Ghana and other similar countries in the sub-Saharan African region are caught in the trap of producing and exporting products that are of low sophistication level (low PCIs) reflecting in low and negative ECIs for their export baskets. This suggests that the productive capabilities or the collective know-how embedded in these products are limited. Thus, the opportunities for Ghana to leverage on the productive capabilities acquired over the years to chart new paths for structural transformation and subsequent diversification of the economy is constrained. This puts Ghana in a vicious circle or quandary as far as its diversification effort is concerned. The empirical chapter three, with a title “Firm-Level Assessment of Exchange Rate Uncertainty on Ghana’s Non-Traditional Export Performance” revisits the exchange rate volatility and export performance nexus, but this time around at the firm-level, where the exchange rate volatility issue is cast within the context of macroeconomic uncertainty. Based on the resources base view and contingency theories, a plethora of academic research has been undertaken to investigate both the internal and external factors that drive export performance at the Firm-level. Besides, the study investigates the possible institutional constraints resulting in Ghana missing out on the US$ 5 billion target for NTE set for the end of 2017 as envisioned under the Ghana National Export Strategy Plan, 2013-2017. A survey was conducted on NTE firms in Ghana to elicit responses, which were used to construct subjective measures for export performance and the key predictors. Some 87 firms responded to the survey, representing a response rate of 45.8 percent. A similar survey was conducted for some institutions to elicit their views on the possible constraints encountered in the implementation of the Ghana National Export Strategic Plan, 2013-2017. In this case, three out of five institutions contacted unreservedly offered their perspectives on the issue. From both the descriptive and econometric analysis the study provides empirical evidence to support both the resource base view that firms can leverage on their internal resources to enhance their comparative advantage and competitiveness, as well as the contingency theory that assesses the firm's capabilities to overcome external headwinds. Specifically, the results from the study suggest that firms demonstrating moderate to average levels of export commitment and at the same time displaying moderate to average levels of product development capabilities are less likely to report low export performance. At the same time, average to high levels of export performance are more likely to be predicted by firms that demonstrate a high adoption rate of export promotion programmes. The study also finds moderate to average and high levels of macroeconomic uncertainties are more likely to predict low export performance and less likely to predict average to high levels of export performance. From a descriptive analysis of the responses from firms and government agencies, the study suggests that the Ghana National Export Strategy Plan, 2013-2017 suffered from both awareness and financial resources deficits, thus affecting the attainment of set targets. To the extent that most of the key stakeholders demonstrated limited awareness of the strategic plan, it was equally possible that not many activities were executed to actualise the objectives of the strategy. Besides the vehicle intended to provide funding support for firms, EDAIF appeared not to be effective in delivering the volumes of credit required. Meanwhile, the implementing agency, GEPA, was starved of the requisite funds to executive the priority projects.Item Employment and Household Welfare in Ghana(University of Ghana, 2019-05) Bofah, R.O.The developing world is challenged with a large number of persons involved in less productive and vulnerable employment. Ghana is not an exemption. This limits the country’s effort towards a successful achievement of the Sustainable Development Goals by 2030, particularly Goals 1, 8 and 10 which relate to ‘no poverty’, ‘decent work and economic growth’ and ‘lower inequality’, respectively. This study broadly examines the role of employment in explaining welfare in Ghana. To analyse this broad objective, the study carries out separate analyses to examine three specific research objectives and corresponding questions. The study contributes to the literature by analysing the effects of different groups of employment status on rural-urban household consumption welfare. Using data from the seventh round of the Ghana Living Standards Survey conducted in 2016/17 (GLSS7), the study finds higher returns to non-farm self-employed with employees (employers) than other forms of employment status. Non-farm self-employed without employees (own-account) and formal employees contribute to improving household welfare at the lower and more upper quantiles, respectively. Returns to non-farm own-account are found to be generally higher than agricultural own-account. The study finds detrimental effects of informal paid employment, unpaid employment, inactivity and unemployment on welfare. It shows clear consumption inequality gaps between rural and urban households, with the latter reporting a higher welfare at the mean and along all quantiles than the former. The observed inequality gaps are wider among the poorer than richer households. These gaps are primarily due to the differences in returns to observable characteristics between rural and urban households. Among others, employment, education and household size contribute most to explaining the observed rural-urban inequality gaps in Ghana. Also, the study contributes to the literature by examining the degree and determinants of employment diversification within and across the agricultural, services and industry sectors among rural households. Relying on data from the fifth and seventh rounds of the Ghana Living Standards Surveys conducted in 2005/06 and 2016/17 respectively (GLSS5 and GLSS7), the study reveals a greater degree of employment diversification within the agricultural sector followed by the services and industry sectors, respectively. Further, it is established that factors such as gender, marital status, education, landholdings, location, seasonal migration and infrastructural development remain key determinants of the on-going employment diversification in rural Ghana. For instance, being a female-head relative to being a male-head lowers employment diversification within the agricultural sector but increases diversification within the non-farm sectors (services and industry). In the same vein, infrastructural development in rural communities largely favours a higher degree of employment diversification within the non-farm sectors as compared to the agricultural sector. Another key finding is that education significantly decreases households’ diversification within the agricultural sector but increases that of the non-farm sectors. Further, the study contributes to the existing literature by examining the effect of employment diversification on the level of rural inequality and its change over time. Using the GLSS5 and GLSS7 datasets, the study establishes that the sum effect of employment diversification within the three major sectors contributes to decreasing the level of rural inequality in 2005/06 and 2016/17 and its change over the two periods while diversification across the sectors rather worsens rural inequality. The net effect of employment diversification is shown to be inequality-increasing. Regarding the independent effects of diversification within each of the three sectors, the agricultural and services sectors consistently contribute to reducing the level of and changes in rural inequality. Diversification within the industry sector worsens the change in inequality but marginally influences the level of inequality. A stimulating finding is that diversification within the agricultural sector contributes considerably to reducing the level of rural inequality than services and any other factor. In most cases, the effects of diversification are even much stronger when secondary employment activities are accounted for. The following recommendations are based on the study’s findings. To sustain and further enhance the welfare gains of non-farm employers, the government through its relevant institutions such as the Registrar General’s Department, the National Board for Small Scale Industries (NBSSI), the Ministry of Trade and Industry, the Ministry of Employment and Labour Relations and the Ministry of Business Development should expedite a nation-wide formalisation of the informal sector with emphasis on business registration, records keeping, customer service, innovation and basic management, among others. These actions are expected to improve and expand businesses owned by non-farm employers with the potential of generating employment and earnings opportunities for the unemployed, the unpaid worker, and the inactive, as well as other vulnerable workers including the agricultural own-account. Again, it is recommended that for rural households to experience a greater degree of employment diversification in the non-farm sectors, the government through its relevant institutions including the Electricity Company of Ghana, the Ghana Water Company, the Ministry of Roads, Highways and Transport, the Ministry of Trade and Industry, the Bank of Ghana and the National Development Planning Commission should prioritise infrastructural development across the rural communities. A particular attention should be geared towards the expansion or development of marketplaces, electricity, roads, portable water systems and financial institutions (such as banks and micro-finance) in the rural areas. Another policy direction is that government should aim at capitalising on the inequality-reducing effect of employment diversification within the services sector in rural Ghana. Key government institutions including the Ministry of Business Development, the Ministry of Trade and Industry, and the NBSSI should encourage, train and support rural farmers to complement their farming activities with wholesale and retail trading, and other forms of services. Furthermore, the observed negative linkage between employment diversification in the agricultural sector and education should be properly addressed through a specific policy intervention and public re-orientation. By encouraging educated persons into the agricultural sector, the country can minimise the socio-economic cost of the large numbers of unemployed secondary school leavers and tertiary graduates. In order to attract a good number of these leavers and graduates into the agricultural sector, the government, through its key stakeholders including the Ministry of Food and Agriculture, the Ministry of Business Development, the Ministry of Trade and Industry, the NBSSI, the ADB and the Ghana EXIM Bank, should aim at providing different forms of assistance such training, storage and credit facilities, and ready market in the sector. Such initiatives can improve the productivity of and returns to the agricultural sector and consequently minimise the present rural-urban consumption inequality gaps. By promoting a higher diversification in agricultural employment, the country stands a better chance of fighting against the rising rural inequality. Relatedly, government’s current initiatives on planting for food and jobs, rearing for food and jobs, one-village-one-dam and one-district-one-factory should, through the Ministry of Special Development Initiative, be used to stimulate employment opportunities across the rural areas with a particular attention on the savannah belt of the country. These policy initiatives should also aim at motivating and benefiting the unpaid workers, the unemployed and the inactive.Item Natural Resources, Institutions and Domestic Revenue Mobilization: From Global to Local Evidence(University Of Ghana, 2019-12) Chachu, D.O.The quest to mobilize sustainable domestic revenues for financing development is a challenge for many countries, especially those in the developing world. Discovering non-renewable natural resources should therefore be good news. However, the notion of a natural resource curse suggests that countries that are rich in natural resources often perform poorly on several development outcomes. A related term, fiscal resource curse, has emerged. The fiscal resource curse is the inability of countries to raise taxes from a broad base in the presence of nonrenewable natural resources. In other words, natural resource revenues displace non-resource tax effort (i.e. mobilization of tax revenues outside the natural resource sector). We take advantage of a new Government Revenue Database (GRD) to examine three key research questions on the relationship among natural resources, institutions and domestic revenue mobilization. For each question, we also examine whether context matters by examining the relationships for the full global sample as well as for developing countries. First, we examine the validity of a variant of the fiscal resource curse using a more comprehensive dataset which covers not only hydrocarbon revenues but also minerals. We employ a novel instrumental-variable strategy to estimate the causal effect of resource revenues on non-resource tax effort by exploiting the so-called “China shock”. Following her accession to the World Trade Organization in 2001, China’s engagement in the non-renewable resource trade has increased several fold, driving up commodity prices and raising resource revenues among exporting countries. China’s resource trade model with developing countries has been characterized by resource-for-infrastructure deals, which means that exporting countries also benefit from infrastructure projects rather than just liquid capital flows from the exports of natural resouces. We exploit this exogenous variation in China’s non-renewable resource trade to examine the causal effect of resource revenues on non-resource tax effect using a Two-stage Least Squares Approach. We do not find consistent evidence of a negative relationship between resource revenues and non-resource taxes. On the contrary, we find that, once we account for China’s role in the global non-renewable resource trade, a percentage point increase in resource revenues as a percentage of GDP leads to about a 0.3 percentage point increase in non-resource taxes as a percentage of GDP. China’s provisioning of energy and transport infrastructure in developing countries in lieu of export revenues might be easing the binding constraints to expanding the non-resource sector. The latter becomes the basis for increasing output in the sector and therefore increasing non-resource tax revenues. Second, the view of the New Institutionalists School is that institutions matter in explaining development outcomes. North (1990) argues that institutions shape the efficiency of markets. Others maintain the view that the quality of institutions shape fiscal policy, even in the presence of natural resources (for example, Masi, Savoia, & Sen, 2018; Botlhole, Asafu-Adjaye, & Carmignani, 2012). Evidence on the mediating role of institutions in improving tax revenues outside the natural resource sector has however been scanty. We investigate whether the type and quality of institutions can mediate the effect of natural resource rents on non-resource tax effort. We begin by proposing a simple theoretical model of social welfare maximization using optimization techniques. The model is characterized by a social planner, who allocates different levels of effort in mobilizing revenues from the natural resource sector and the non-resource sector. The planner determines the allocation of benefits to two main groups in the society: elites and non-elites. These choices are made subject to the total effort and revenue possible to maximize total welfare within the society. A key model prediction is that institutions that focus more on redistribution have a weak moderating influence on the negative effect of natural resource rents on non-resource tax effort, especially when commodity prices are high. Giving that the model is limited to looking at the role of only one type of institution, we empirically examine whether the prediction of the model is consistent by interacting natural resource rents with 12 different measures of institutions commonly used in the literature. Using Fixed-effects Estimators and a Generalized Method of Moment Estimator, we compute marginal effects of natural resource rents on non-resource tax revenues. We do not find a statistically significant impact for a majority of the institutional variables. However, we find a weak evidence of a mitigating effect for two key variables: constraints on executive and the quality of a democracy. The weak impact of these two mediating variables is premised on the fact that, while they play a mitigating role, they are unable to completely undo the negative impact of natural resource rents on non-resource tax revenues. Other covariates that we find important for determining non-resource tax revenues are the level of GDP per capita in an economy, the size of the agricultural sector and the extent to which there is control over corruption. Finally, following the literature on the differential impact of different types of natural resources on different development outcomes, we distinguish between hydrocarbon resources and nonhydrocarbon resources (metallic and non-metallic minerals) in assessing how they differentially impact on non-resource tax effort. In other words, we test the hypothesis that hydrocarbon-rich countries perform worse in non-resource tax effort than mineral-rich countries. We present a simple theoretical framework of how the exploitation of different types of natural resources yields varying incentives for non-resource tax effort by extending the theoretical framework of Knack (2009). Our theoretical model suggests that hydrocarbon-rich countries perform worse in non-resource tax effort than mineral-rich countries. Discovery of hydrocarbon resources and its exploitation is more likely to be concentrated in the hands of the elite few. Revenues are therefore prone to being expended through rent-seeking behaviour, generous tax incentives and lack of investment in tax capacity. These undermine non-resource tax effort in hydrocarbon-rich contexts compared to mineral-rich contexts where mineral occurrence is likely to be more widespread and therefore control over its exploitation is likely to be less centralized. We confirm the theoretical results using alternative data sources and alternative panel econometric techniques. In a sample of over 80 countries over the period 1980 to 2015, we find that hydrocarbon rents consistently exert a negative effect on non-resource tax effort. We do not find such consistent evidence for mineral rents nor for mineral-producing countries. This evidence is consistent at the global level and in developing countries. Our results suggest that government domestic revenue mobilization policy must take into account both local and external factors that contribute to expanding the non-resource sector, reducing informality and diversifying the economy. These factors include providing the relevant development infrastructure (for example energy and transport), improving tax administration and strengthening institutions of state. The quality of democracy, constraints on executive power and control of corruption are some key institutional factors that would be relevant for improving non-resource tax effort. Given that the risks of a lower non-resource tax effort are higher in hydrocarbon-rich countries, the factors described above should be given greater attention there.Item Labour Skills Mismatch in Urban Ghana(University of Ghana, 2018-12) Adjei, P.The expected harmony in terms of forward and backward linkages between education, skills and labour market outcomes has been met with frictions and imperfections that raises questions about the market relevance of acquired education and skills relative to industry requirements. The phenomenon of skills mismatch thus remains crucial for developing economies like Ghana considering colossal investment in education and skill development. This study, therefore, attempts to provide a comprehensive analysis of the skills mismatch phenomenon in urban Ghana, with specific emphasis on the causal triggers, effects on post-hire outcomes and a critical examination of skills and personal portfolio required by industry players and firms in Ghana. It is structured into seven chapters with three distinct but interrelated empirical papers that examine the core issues of mismatch.Item Education, Inequality and Earnings in Ghana(University Of Ghana, 2018-10) Adu-Danso, E.K.This thesis uses the fifth and sixth rounds of the Ghana Living Standards Survey (GLSS) conducted in 2005-2006 and 2012-2013, respectively, to examine the themes of education, inequality and earnings in Ghana. Three key objectives are pursued. The first objective is to assess how educational attainment, measured by the average years of schooling, relates to inequality in education. The second objective is to examine how education influences inequality in earnings through an assessment of the heterogeneous returns to education. The final objective is to provide an analysis of the effect of educational mismatch (over- and under education) on earnings and the return to education. Consistent with these objectives, this thesis is organised into three empirical chapters. The first chapter examines the nature of the relationship between educational attainment in the form of average years of schooling and the various measures of inequality in educational attainment based on the educational Kuznets hypothesis. By employing a pseudo-panel estimation approach, the study finds evidence of a non-linear relationship between the mean years of schooling and educational inequality with a threshold occurring around nine years of education. The results suggest that advances in educational attainment may not necessarily be associated with a reduction in educational inequality in Ghana, but may increase it depending on where the increase occurs. That is, while education expansion from the lowest percentiles of the educational attainment distribution up to the median is found to be associated with declines in educational inequality, an expansion in the attainment of persons in the higher percentiles is associated with a rise in educational inequality. Also, increases in the proportion of people with secondary, post-secondary and tertiary education were found to be associated with rising educational inequality in absolute terms over the period covered by the analysis. Public policy should, therefore, be focused on increasing educational attainment particularly at the basic education level given the benefits of increasing human capital and making its distribution more equal, as rising inequality in educational attainment has potentially adverse consequences for economic growth and income inequality. The second chapter assesses the heterogeneous returns to education across individual income groups within the human capital framework, given the implications of such patterns for the inequality-reducing role of education. The analysis is conducted within the operationalised sectors of employment: the public, formal private, self-employment and agriculture. Recent studies on Ghana that have assessed whether there exist variations from the mean returns to schooling have resulted in mixed outcomes. While some studies have found variations from the mean to exist with the returns to education being highest at the top decile of the earnings distribution and declining down the distribution, others have found the returns to education to be highest at the bottom decile of the earnings distribution and decreasing as one moves up the earnings distribution. Quantile regression is used to examine whether there is individual heterogeneity in the returns to schooling. The results reveal that the impacts of education on earnings are not equal across the conditional earnings distribution in the pooled employment sectors or the public and formal private sectors of employment. However, such patterns are not observed for self-employment. The returns to education are highest in the bottom decile of the earnings distribution and lowest in the top decile for the public sector, indicative of the fact that within the sector, education has a more equalising effect on earnings. For the formal private sector, returns are highest in top earnings decile and significantly lower in the bottom earnings decile, giving credence to the view that education may widen earnings inequality within the sector. For the pooled employment sectors, although education appears to potentially widen the earnings differences between workers with low-quality skills and those with high-quality skills in the GLSS 5 (2005-06); however, it tends to bridge the earnings gap between the least advantaged and the most advantaged in the GLSS 6 (2012-13). This change in the effect of education along the conditional earnings distribution over the period of analysis may be accounted for by a marked deficiency in the relative demand for highly skilled workers over the period rather than a significant increase in the demand for low skilled workers in the Ghanaian economy. Moreover, the observed uneven effects of education along the conditional earnings profile strengthens the view that public policy must seek to improve upon the quality of education, especially among the least advantaged. The final chapter provides empirical evidence on the effect of educational mismatch on earnings and the returns to education in Ghana. The study utilises a data-based criterion, being the modal measure, to determine the educational requirements of jobs in the two-digit classification for the GLSS 5 (2005-06) and the three-digit classification for the GLSS 6 (2012 13) of occupations. The analyses are conducted based on the economic sectors of employment (i.e. agriculture, industry and service), the employment status (i.e. wage and self-employment) and the institutional sectors of employment (i.e. public, formal private and informal sectors). The results suggest that over- and under-education exists in Ghana’s labour markets. While in the GLSS 5 (2005-06), 34 percent of workers are classified as over-educated and 9 percent under-educated, in the GLSS 6 (2012-13), 42 percent and 12 percent of workers are classified as over-and under-educated, respectively. The incidence of over- and under- education also varies depending on the sector of employment. Furthermore, given other characteristics, over educated workers tend to earn more while under-educated individuals tend to earn less than University their co-workers who possess the job-specific level of education. Nonetheless, the over educated (under-educated) earn less (more) than workers with the same level of education and engage in jobs for which they possess the job-specific level of schooling. The occurrence of penalties associated with being over-educated may be indicative of a waste of resources perhaps due to government subsidization. Government policy can, however, be directed at enhancing skills utilization in enterprises. Some best practices include the adoption of occupational forecasting models to anticipate future skills needs and supplies and the setting up of sectoral and occupational skills councils to advise on policy.Item Demand and Benefit Incidence of Healthcare Services in Ghana(University of Ghana, 2018-06) Adu, O.S.This thesis investigates the factors that determine demand for healthcare in Ghana by placing emphasis on price, income, and opportunity cost (the price of time). The study uses data from the sixth round of Ghana Living Standards Survey (GLSS 6) conducted in 2012/2013. The thesis is organized in a paper-based approach. The first paper aims at finding the sensitivity of demand for healthcare services to price and income, as well as finding the benefit incidence of the payment for healthcare services in Ghana. The paper estimates how changes in price and income of the consumer affect their demand for a particular healthcare provider – public, private and alternative healthcare, and concludes that overall, demand for healthcare is found to be price and income inelastic. That is, price and income elasticities of overall healthcare provider were estimated to be -0.016 and 0.01 respectively, indicating that demand for healthcare is less sensitive to changes in both price and income. The three types of healthcare – public, private, and alternative healthcare services are all price and income inelastic, though the coefficient of alternative healthcare is not statistically significant. A concentration index of 0.119 shows that payment of healthcare services in Ghana fall on the rich more than the poor. Based on the findings that there exist inequality and inequity in demand for healthcare measured by healthcare payment, it is recommended to policymakers to restructure the health system in such a way that such inequalities and inequities are removed or reduced substantially. Unlike the traditional Price Theory where demand for a commodity is largely determined by price and income, demand for healthcare in Ghana is found to be less sensitive to changes in price and income after controlling for the National Health Insurance Scheme. This suggests that in an attempt to find the determinants of demand for healthcare services, more attention should be given to other influential factors such as health insurance. Following from the conclusions of the first paper, the second paper then investigates the effect of the National Health Insurance Scheme on demand for healthcare. The finding is that enrolment onto the National Health Insurance Scheme (NHIS) increases healthcare utilization. Using Propensity Score Matching, the predicted probability of the effect of NHIS on healthcare utilization is 0.243 but decreases no care by the same magnitude (-0.243). In terms of where the individual seeks healthcare, the predicted probabilities for visiting public, private, and alternative healthcare providers are 0.231, 0.014, and -0.002 respectively. This means that NHIS increases public and private healthcare but decreases alternative healthcare utilization. People who sought healthcare did so for the purposes of treating illness, injury, check-up and follow-up, childbirth-related issues (prenatal, delivery, and antenatal), and vaccination. The Propensity Score Matching (PSM) predicted probability for treating illness, injury, check-up, childbirth-related issues, and vaccination purposes are 0.022, -0.001, 0.009, 0.002, and -0.032 respectively. The interpretation is that enrolling in NHIS increases healthcare utilization to treat illness, check-up, and childbirth-related purposes, but decreases utilization for injury and vaccination purposes. The PSM predicted probability of the effect of NHIS on out-of-pocket payment is -6.309. This means that NHIS decreases out-of-pocket payment by 6.309. The findings, therefore, suggest the importance of improving the National Health Insurance Scheme to increase access to healthcare. The National Health Insurance Scheme was established in 2003 with the aim of reducing the cost of healthcare provision and increase access to healthcare. However, the paper finds that even when the price is assumed to be “zero”, there still remain some economic costs for choosing a particular healthcare provider over the other. This is called the price of time or opportunity cost. In analyzing the effect of the price of time on choice of healthcare provider, the study finds that travel time and waiting time have a significant effect on the choice of healthcare provider, but not travel cost. An hour increase in the time taken to travel to the healthcare facility is likely to decreases the probability of seeking healthcare from public modern, private modern, and chemical shop by 3.1, 0.5, and 3.6 percentage points. The effect of the time spent at the healthcare facility on the choice of a particular healthcare provider is also significant. For instance, if waiting time increases by 1 hour, the effect on visiting public modern and traditional health centers will increase by 6.0 percentage points and 1.3 percentage points respectively. However, the effect on private modern and chemical store will be a decrease in probabilities by 5.0 and 2.8 percentage points respectively. Based on the findings of the study, it is recommended to policymakers to institute measures aimed at reducing the cost of providing healthcare, increasing access to healthcare especially to the poor, and also raising incomes of consumers. Health insurance is found to significantly increases healthcare utilization and decrease out-of-pocket payment. Therefore, the National Health Insurance scheme should be well resourced in order to provide quality services to subscribers, and also encourage the poor to enroll. It is also recommended to policymakers to make effort to decrease travel time and waiting time at the health facilities in the country to improve healthcare delivery.Item Trade Logistics, Trade Costs and Bilateral Trade within Sub Saharan Africa – A Panel Estimation(University of Ghana, 2014-07) Nutor, R. S.; Turkson, F. E.; Assibey, E. O.; Turkson, R. S.; Assibey, E. O.; University of Ghana, College of Humanities, School of Social Sciences, Department of Economics; University of Ghana, College of Humanities, School of Social Sciences, Department of EconomicsWorld trade has expanded over the last few decades, but the trade within Africa especially among Sub-Saharan African (SSA) countries has been low. Globally there has been a reduction in tariff rates, reducing trade costs in general, but the SSA region still records the high costs of trade as compared to other developing regions and this has hindered the flow of trade within the region (World Bank Doing Business report, 2013). SSA’s poorly developed trade logistics in the form of poor infrastructure, weak institutions, and trade facilitation have largely accounted for the region’s high trade cost (Turkson, 2011; Heokman and Nicita, 2008). Using a logistics augmented gravity model, the study analyzes the impact of improvements in trade logistics performance (aggregated and disaggregated) on the volume of bilateral trade between countries in SSA over a period 2007 to 2012. With three rounds of the Logistic Performance Index (LPI) published by the World Bank, and trade indicators from UNCOMTRADE and CEPII, the Hausman Taylor estimation results indicate a positive impact of logistics performance improvements of exporter country on volumes of bilateral trade among countries in SSA over time. Findings recommends the need for both private and public institutions that have direct or indirect influence on infrastructure and trade facilitation to develop innovative approaches to help tackle the challenges of high transport and transaction costs, and weak institutional capacities facing many countries in SSA, as a means of boosting trade within the region, increasing their ability to compete in the global economy and attracting Foreign Direct Investment (FDI).Item Non-Farm Income Diversification In Rural Ghana; Determinants And Implications For Income Distribution And Welfare(University of Ghana, 2010-06) Senadza, B.; Asante, Y.; Akoena, S.K.K.; Asante, F.A.; University of Ghana, College of Humanities , School of Social Sciences, Department of Economics.Rural households in developing countries have for a long time been perceived as farm households, and that they receive their income predominantly from agriculture. There is growing evidence however in the rural livelihoods literature to show that rural households in developing countries derive a significant proportion of their incomes from non-farm activities, and income from this source is growing. In addition, nonagricultural activities constitute the main occupation of an increasing number of rural households. National level household survey data indicates that Ghana is not different in this regard. This study investigates the patterns as well as the determinants of nonfarm income diversification (participation, income and portfolio of income activities) among rural households in Ghana using GLSS 5 data. It also examines the effect of non-farm income on income distribution and household welfare. Results show that non-farm activities constitute an important source of employment and income for rural households in Ghana. Non-farm income accounted for 41 percent of rural household income in 2005/06, with more than 50 percent of rural households having at least one non-farm income activity. Education and land are important for the type of income strategy adopted by households. Education is important for a purely non-farm wage employment income strategy or combination of non-farm wage and other strategies. For a purely non-farm wage income strategy, the effect of education is evident only after the mean years of education of the household exceeds six years. Households with land above 20 hectares derive income from three main strategies: on-farm only; on-farm and non-farm self-employment only; and onfarm and non-farm self- and wage-employment only. Overall the study obtains robust results for participation (number of non-farm activities), income shares and income strategies regressions. Education, household size and composition, wealth status (poorest 40% relative to richest 20%), access to credit, electricity and markets are main the determinants of non-farm income diversification in rural Ghana. On the effect of non-farm income on income inequality, the study finds that in aggregate, non-farm income worsened income inequality. In terms of its components, while non-farm self-employment income reduced income inequality, non-farm wage income on the other hand, worsened income inequality in rural Ghana. The results of the effect of non-farm income diversification on welfare indicate that participation in non-farm activity has a positive effect on household welfare. For instance, participation in non-farm activity increases welfare by approximately 10% above that of a household that does not participate in non-farm activity. The welfare level of households with two non-farm activities is 21% above that of households that do not participate in non-farm activity . The results also indicate that households combining on-farm activities with other offfarm activities or are engaged in purely non-farm activities are better off than households deriving income purely from on-farm activities. The findings call for a rethinking of strategies that have traditionally focused on improving agriculture as the solution to rural poverty. Strategies to promote rural economic activities need to take into account the heterogeneity in the asset positions across rural households and the multiplicity of activities in which they are engaged to generate income. A key determinant of non-farm income diversification is education. Enhancing better access to education and narrowing education inequality among rural households would go a long way to create opportunities for effective participation in non-farm activities and to alleviate rural poverty. Access to credit and electricity are important for non-farm self-employment (small and micro enterprises) activities. Policy should therefore aim at enhancing access to small credits to bridge the gap in physical assets endowments between asset-rich and asset-poor households. The policy of rural electrification must also be effectively implemented to promote village/ cottage industries. Improving the physical infrastructure like roads and markets would help in the growth of non-farm employment opportunities. Policy should aim at promoting access to well developed infrastructure. This study however does not advocate for a promotion of non-farm activities as a substitute for agriculture, but rather highlights the potential complementarities that may exist between the two.