Heterogeneous Market Participation Channels and Household Welfare

Abstract

This paper uses panel data and qualitative interviews from southwestern Ghana to analyse farmers’ heterogeneous oil palm marketing decisions and the effect on household welfare. We show that despite the supposed benefits that smallholders could derive from participation in global agribusiness value chains via formal contracts, such arrangements are rare although two of Ghana’s ‘big four’ industrial oil palm companies are located in the study area. In the absence of formal contracts, farmers self-select into four main oil palm marketing channels (OPMCs). These OPMCs are associated with varying levels of welfare, with processing households and those connected to industrial companies by verbal contracts being better off. Furthermore, own-processing of palm fruits is shown to reduce gender gaps in household welfare. We also unearth community and household level factors that hamper or facilitate participation in remunerative OPMCs. These results have implications for development policy and practice related to inclusive agricultural commercialization.