Picking winners in agriculture depends on policy objectives

It is common for developing country governments or development partners to identify priority agricultural subsectors or value chains that receive targeted support to achieve policy objectives. In Ghana, for example, the new administration has prioritized the maize, rice, sorghum, soya and vegetables value chains under its Planting for Food and Jobs initiative. But how are these sectors identified? Presumably governments follow a systematic approach whereby a sector’s competitiveness, profitability, size, growth potential, and links with the rest of the economy are considered. This is a complex task, which is further complicated when there are potentially competing policy goals, such as economic growth, regional equity, job creation, poverty reduction, or improved nutrition.

The Rural Investment and Policy Analysis (RIAPA) tool, developed jointly by IFPRI and the International Fund for Agricultural Development (IFAD), is a computable general equilibrium (CGE) model that has been used in a variety of country contexts and policy scenarios to help policymakers understand the potential impact of their policy actions under different assumptions about the behavior of consumers or producers. CGE models are calibrated with economic statistics presented in Social Accounting Matrix (SAM) format. Ghana’s newest SAM for 2015 was jointly developed and recently launched by the Ghana Statistical Services (GSS), the Institute of Statistical, Social and Economic Research (ISSER), and IFPRI.

Using the RIAPA model and Ghana SAM, Faaiqa Hartley and Channing Arndt explore the effect of increased productivity in agricultural subsectors on growth, employment, poverty and nutrition indicators in Ghana. They find that productivity gains in subsectors such as fisheries, oilseeds and vegetables can be particularly beneficial to economic growth, job creation in the agri-food system, poverty reduction, and nutritional outcomes, and hence these sectors should be prioritized. However, prioritization may change depending on the weight that policymakers attach to these various outcomes.

The paper was first published as a chapter in ISSER’s State of the Ghanaian Economy in 2016 report in 2017, and has now been reproduced as a GSSP working paper. Upcoming GSSP studies in 2018 using the RIAPA model will complement this study by looking at government investment strategies for achieving faster productivity growth in agricultural subsectors, as well as the potential growth and employment effects of government’s Planting for Food and Jobs initiative.