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The cocoa sub-sector of Ghana is a major employer and source of income for most
smallholder farmers as well as a major export earner for the government. The importance
of the cocoa sub-sector has resulted in government committing over 50% of agricultural
expenditure to the sub-sector in an attempt to increase annual output. Despite the large
share of government agricultural expenditure on the sub-sector, studies have found the
productivity level in the cocoa sub-sector to be amongst the lowest in the world.
This study was conducted to find out how responsive cocoa supply was to government
expenditure on the sub-sector. Specifically, the objectives of the study were to explore the
composition of expenditure on non-research activities and then to determine the
responsiveness of cocoa supply to research and non-research expenditures. The study
employed the vector error correction model, using time series data from 1996 to 2016 to
estimate both the short- and long-run elasticities. Results show that in terms of
composition and pattern of non-research expenditure, larger share was dedicated to
administrative work while training of field and technical staff received the least
expenditure over the study period. Further, the findings show that expenditure on research
positively impacted the level of cocoa supply in both the short- and long-run. Non-
research expenditure on the contrary had a negative effect on cocoa supply in the short-
run but showed a positive effect in the long-run. The empirical results showed that cocoa
supply was more responsive to research expenditure than to non-research expenditure.
The study recommends the need for increased research expenditure and the need for right
targeting of non-research expenditure to ensure the best possible aggregate cocoa supply
response. |
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