Use of Labor, Agricultural Assets

Several past studies have investigated issues with respect to levels of productivity, and also in relation to usage of labour, farm assets and other inputs e.g., However, any deductions from such analyses might not reflect levels of income inequality and persistent poverty among rural farmers. The reason is that other factors including types of crops cultivated and the opportunity of a farmer to allocate resources to generating additional incomes from nonfarm sources, which are equally important, are not often captured in such analyses.

The questions raised in this paper are, therefore, based on the premises that the opportunities of a farmer to cultivate a particular farm size, grow specific types of crops and adopt a set of income sources might not be the same among all rural farmers and so could lead to income inequality and dissimilar poverty levels.

This argument could be linked to the evidence provided by some past studies that income diversity is more related to high-income households than the lower income ones, a scenario which this paper contends to result from lack of equal opportunities among the farmers in term of adopting similar livelihood strategies that earns them the same standard of living.

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This situation could lead to income inequality and, therefore, persistent poverty among some sects of rural farm households, which this paper argues to reflect differences in farm sizes, crop and income diversity in the rural farm sector. Issues on diversifying crop cultivated have received some attention in the literature with various implications for poverty, for instance, farmers often grow multiple crops as a measure of security against production challenges like shocks that could mitigate poverty reduction efforts.

Also, the available literature suggests that diversifying into high-value crops could lead to income inequality and, therefore, could cause persistent poverty among some sects of the rural farmers who have less capacity to undertake crop diversification. For example, in Ghana, types of crop cultivated have been described as an important element that induces disparities in the benefits gained from agricultural growth and poverty alleviation among farmers. Irrespective of this view it still remains debatable in the literature as to whether or not intensifying high-valued cash crops or staple food crops cultivation induces income inequality.

Thus, whilst some researchers have upheld the view that cash crops are elements of causing income inequality in a farm economy, some others have contended that production of high-value cash crops mitigate income inequality since such production offers some employment to poorer farmers along the value chain. In the midst of these debates, the high valued crop has not been identified as pro-poor in comparison with staple food crops in Africa. This study contributes to this debate by investigating whether or not crop diversity within the agro-ecological location is an important determinant of income inequality and poverty levels among rural farmers since these aspects have not been clearly explained in the past empirical literature.

Apart from cultivating multiple, the available literature has pointed out that farm households usually earn additional incomes from multiple nonfarm income sources in recent times. Also, some empirical evidence on Ghana indicates that several farm households use diversified income sources. Thus, instead of farm sizes being expanded among the smallholders for higher farm outputs, it is being challenged by increasing nonfarm occupational engagements. Meanwhile, few scholars have argued that nonfarm income sources are becoming important sources of credit generation for farm investment in Ghana and some other parts of sub-Saharan Africa, but whether diversity in income sources reduces income inequality and poverty levels among the rural farmers or not has not extensively examined.

This study, therefore, contributes to the understanding of how diversity in income sources influences levels of poverty and income inequality among rural farm households. This is important for policy formulations for agricultural growth in line with poverty and inequality reductions as well as ensuring effective farm resource allocations among various efforts of rural occupational development. Inequality portrays the overall income distribution which could lead to clustering in the distribution, such that members within each cluster have similar income levels, but the incomes are different between the clusters. Thus, inequality leads to divergences and disparities in economic well-being in any given population.

A number of previous studies examined inequality and gave reasons for its persistence in some advanced economies e.g, whilst many others have established inequality differences between countries using macro-data e.g.  Also the trends income inequality have been examined by some recent studies in terms of interactions between economic growth, poverty and inequality in Ghana. It is obvious that the issues on income inequality have gained some importance in economic literature, however, related studies specific to economic diversification and poverty in rural sector are limited. Previous studies do not link inequality to income diversification issues in rural Africa using microdata at household level.

The current paper contributes to closing this gap by providing a more comprehensive analysis that links rural economic diversity, poverty and income inequality. Moreover, it has been generally suggested that locations of farmers in terms of diverse agro-ecological conditions induces different experiences of climatic conditions, income sources, types of crops, markets and technologies among other factors. Also, farm sizes vary for several reasons including land availability, soil fertility, capacities and credits among other constraints across ecological zones. Similar evidence has been reported in the literature on Ghana that farm sizes cultivated by farmers depend on agro-ecological locations, productive resources and the types of crops produced.

Besides, seeking additional incomes from nonfarm sources has been unstable among rural farmers in Ghana, because skills and technological differences between the agro-ecological zones and, therefore, dissimilar barriers of entry into nonfarm employment by the zonal locations could lead to inequality. Based on the differences in agro-ecological locations, the opportunities offered by the rural agrarian system in sub-Saharan Africa to farmers to harness their economic wellbeing has not been equal and it is not clear how diversities in income sources and crops produced per the ecological zones influence income distribution and poverty levels among the rural farmers.

Additionally, diversifying crop production has received some attention among researchers, for instance, poor rural dwellers often diversify crops cultivated to mitigate their production challenges including shocks that could lead to poverty reduction. Emphatically, diversifying into high-value crop could lead to income inequality and for that matter greater poverty among some sects of the rural farmers who less capacity to undertake extensive crop diversification. Also, the distribution of farm sizes among farm household poses income inequality among farmers in Africa Thus, the types of crop and the farm sizes under cultivations could lead to income inequality among the farmers and as a result, differential levels of poverty among them.

Empirical evidence from developing countries suggests that increased farm sizes, diversified income sources and diversity in crop production are essential elements that influence the economic wellbeing of rural farm households. Whilst some scholars have asserted that these factors could lead to poverty reduction, others have pointed out that it might cause income inequality among rural households, which might sequentially perpetuate poverty levels. The reason might be that heterogeneity exists in farm sizes, income sources and types of crops produced among the rural farmers, implying some tendency of denying several of them equal opportunities of attaining similar standards of living.

For instance, households’ ability to earn incomes using multiple sources and to cultivate different types of crops depends on skills, farm size and productive assets among others, which are often unevenly distributed among farm households. This situation might lead to income inequality which in turn, poses a challenge for poverty reduction efforts in the rural farm sector in Africa. Meanwhile, poverty is said to be endemic in rural farm sector in the developing world, including Ghana, however, there has not been extensive empirical studies that have established some linkages between income inequality, poverty and differences in differences in farm size, among rural farm households and this where the study contributes.

Moreover, diversity in agro-ecological environments can be directly linked to the types of crops cultivated, and the nature of income generating activities used by farm households as means of livelihoods. Meanwhile, the economic well-being of the rural farm households invariably depends on farm production and other complementary nonfarm income sources, which in turns, hinges on the type of agro-ecological locations being inhabited. An implication is that, by the virtue of ecological locations of rural farmers, equal opportunities might not be granted them to cultivate similar crops nor access the same income sources and this might lead to economic inequality as well as unbalanced poverty reduction in the rural farm sector.

Moreover, the issue of reducing poverty among rural farmers has been extensively discussed in the literature and inequality has also been identified as an impediment to lifting people out of poverty. Another point of contention is that majority of rural households engage in multiple economic activities for survival motives and a substantial proportion of them show unstable commitments to participating in secondary income activities. In Ghana for instance, most rural households engage in agriculture but are described to have diversified income sources because they take advantage of temporary nonfarm income generating opportunities.

It is therefore not clear whether diversity in income sources could be stable solution to poverty reduction and lessening income inequality in rural areas or not. This is based on assertion that participating in nonfarm-related economic activities in addition to agricultural production are temporal and are for overcoming shocks rather than for poverty and inequality reduction motives. The implication is that, deriving maximum welfare from diversified occupational engagements can be ambiguous and the poorer households access to diversified income sources might be undefined and unreachable.

Besides, diversity in income sources might not be a sufficient condition for poverty and inequality reduction in a rural farm setting in Africa since they are mostly inter-temporal. Regrettably, implications for gains from rural income diversity among the rural farmers has not been well elaborated in income diversification literature. This paper therefore provides some empirical evidence for relationships between diversity of income sources, poverty status and income inequality among rural farmers. Thus, the paper questions whether diversifying rural income sources behaviour have no sustained implications for reducing rural inequality and poverty.