Implications of the Fertilizer-Subsidy Programme on Income Growth, Productivity and Employment in Ghana

We examined the economy-wide impact of a fertilizer-subsidy programme in Ghana with a focus on agricultural-sector productivity, overall economic growth, employment, and welfare. We adopted a modified version of the standard PEP-1-t model. Our results suggest that the fertilizer-subsidy programme improved GDP growth and sector-based productivity— notably, in the main agricultural subsectors and the food industry. Specifically, compared to the business-as-usual scenario, the implementation of the fertilizer-subsidy programme in 2017 improved the productivity of the maize, sorghum, and rice subsectors by about 8.3%, 4.5%, and 3.8%, respectively. These effects were, however, about four-times, three-times, and sixtimes higher in 2020 than their 2017 levels, respectively. We also observed important positive effects on the value-added of the food industry, indicating the presence of a backward linkage with agriculture. The unemployment rate among skilled labour (except urban skilled labour in agricultural) fell under the programme, and the decline in unemployment was relatively more pronounced for rural skilled labour in non-agricultural activities. In addition, we found evidence of positive effects on household consumption and, subsequently, on welfare. Based on these findings, we recommend that the fertilizer-subsidy programme be implemented and, if possible, extended beyond its planned implementation period.