Structural Change and Welfare: A Micro Panel Data Evidence from Ghana

Abstract

Ghana is an example of a developing economy where both output and employment have shifted from agriculture to services and where structural change has not followed the standard pattern observed for many industrialised countries. However, there appears to be a limited understanding of what this changing structure means for poverty reduction and welfare for Ghana, with previous studies focusing mainly on the growth effect of structural change. This article interrogates the welfare effects of cross-sector labour movements in Ghana using the first two waves of the Ghana Socio-economic Panel Surveys. Our results show that labour movements from agriculture to services improve welfare while a move from services to agriculture decreases welfare. We also find that women and younger people are more likely to undertake the welfare-enhancing move, from agriculture to services, than men and older people respectively. On the other hand, we find that men, older people and individuals with relatively high-risk profile are more likely to move from services to agriculture. These findings support the view that structural change in Ghana have played a significant role in Ghana’s poverty reduction achievements in the last three decades.