Ghana's Cash Production Growth: A Regional Analysis of Cocoa Farming under Market Performance

Marcella VIGNERI (Oxford University, UK)

In this paper a production function for cocoa in Ghana is estimated drawing on two household surveys covering the period from 1992 to 1999. Regional data from the two surveys is compared to show how the output rise was effected. It is shown, on the basis of the regional data, that virtually the whole rise in per capita cocoa production occurred over this period, of about 25 per cent, was accounted for by a rise in land productivity.

The estimated production function allows identifying the factors underlying this rise. The most important factor underlying this rise in land productivity was an increase of the order of 34 per cent in the underlying total factor productivity. There were offsetting changes in factor use; the labour to land ratio fell while the non-labour to land ratio rose. The net effect of these offsetting factor proportion changes was negative. Thus the analysis of the micro data shows that, contrary to much of the discussion of the effects of trade reform, that TFP in cocoa production has increased and that non-labour input have risen both relative to land and, very substantionally, relative to labour.

The key ro undertanding the response of the cocoa farmers to the new incenives of the 1990s appears to be the high price of labour to the farms. This is investigated by two means in this chapter. In estimating the underlying production function we draw a distinction between household and hired labour. We then investigate how labour productivity has been changed over the period. While the data underlying this variable are problematic, the evidence is consistent with hired labour having much higher productivity than household labour. The rise in the ratio of both land to labour and for non-labour input to labour will have increased the marginal product of labour. We show that these rises in marginal productivity are broadly consistent with the rises in the priice of labour to the farmer. Our focus on labour productivity is linked to the traditional investigation of land productivity and firm size and shows that the differences in factor proportions by farm size -larg farms use much less labour and non-labour inputs per unit of land- is consistent with the high prices of labour limitimg the expansion of cocoa farming.