Safety net for agriculture: effect of idiosyncratic income shock on remittance payments
Abstract
Purpose
The purpose of this paper is to examine the effect of illness-driven agriculture income shocks on remittance payments in Ghana using a nationally representative household pseudo-panel data set for 1991/1992, 1998/1999 and 2005/2006.
Design/methodology/approach
The two-stage least square instrumental variable technique is used. This is compared with the ordinary least squares estimator.
Findings
The author finds that households in Ghana use remittances to protect themselves from negative agriculture income shocks. The study further reveals that the protection is resilient in female-headed households.
Research limitations/implications
The question of remittances as a safety net mechanism is interesting, but the limitation is the challenges involving the counterfactual setup in studying the effects of endogenous migration choices.
Practical implications
The study provides that, as far as microeconomic factors are concerned, remittances increase in times of negative agriculture income shocks attributed to illness in Ghana.
Social implications
The finding points to the fact that remittance payments play an essential role as an informal safety net during illness-driven agriculture income shock especially for female-headed households in Ghana. This has an important implication for poverty reduction in Ghana.
Originality/value
It provides an empirical test of the claim that remittance flows buffer idiosyncratic shock with micro-level household data that incorporates both internal and international remittances. The paper introduces gender dimension into idiosyncratic shocks’ impact. Also, the data set makes it possible to provide a reliable set of agriculture income shock estimates.
Keywords
Acknowledgements
The author is very grateful to Dr Jesse Matheson and Dr Barbara Roberts for their invaluable support. The author is also thankful to the seminar participants at the Department of Economics, University of Leicester, for their helpful suggestions. The author extends gratitude to the anonymous referees and the editor, at the International Journal of Social Economics for their constructive comments. The standard disclaimer applies.
Citation
Akobeng, E. (2017), "Safety net for agriculture: effect of idiosyncratic income shock on remittance payments", International Journal of Social Economics, Vol. 44 No. 1, pp. 2-20. https://doi.org/10.1108/IJSE-12-2014-0271
Publisher
:Emerald Publishing Limited
Copyright © 2017, Emerald Publishing Limited