Determinants of Consumption Expenditure among Tomato Farmers in Ghana
Aidoo-Mensah, D.
ABSTRACT
By employing OLS estimation, the paper explores the determinants of consumption expenditure among tomato farmers in Ghana using a variant of the traditional Keynesian consumption function. Data for the study were collected from 562 randomly selected tomato farmers from six districts in three regions (Ashanti, Brong Ahafo and Upper East) of Ghana. By employing OLS estimation, the study sought to identify the determinants underlying the respondents’ consumption expenditure. The results show that the consumption expenditure of the tomato farmers is not different from that of the national population in general. The results also indicate a positive relationship between consumption and remittances. This gives credence to the growing view that in most developing countries with Ghana being no exception where the multi-person household concept is common, support from other members of one’s family in the form of remittances help in consumption smoothing. A positive relationship between consumption and income emerges confirming the traditional Keynesian consumption postulate that consumption is a function of income. It also emerges that there is a relatively low marginal propensity to consume of about 7.3% among the respondents, which gives weight to the assertion of deteriorating economy, which is dramatically influencing household consumption in Ghana. The policy implication of this is that appropriate savings mobilisation policies may be designed to take advantage of the relatively high marginal propensity to save which exists among the respondents because of lower consumption levels. Moreover, the study confirms the inverse relationship between consumption and household size, which has been termed as a paradox.
KEYWORDS: Consumption, Income, Quintile, Tomato farmers, Ghana