Abstract

The main objective of this study was to investigate the determinants of household food expenditure and its effects on welfare. As a result of potential simultaneity between food expenditure and welfare, a simultaneous equations model was estimated using the two-stage least squares method. The findings confirm the theoretical and empirical evidences that households reduce the percentage share of their food expenditure as they become richer. Also, increases in the food budget share lead to a reduction in welfare. Different households which spent greater percentages of their incomes on food were as follows: female headed households; households headed by the aged; households whose heads had little or no formal education; households whose heads were married; smaller households; rural households; households in the forest and savannah belts; and households living farther from the nation’s capital. Also, welfare was greater for the following households: female headed households; households headed by the aged, households whose heads had formal education, smaller households, households who owned assets; households living in the urban centres, as well as those living closer to the nation’s capital. Households that must be targeted for support include male-headed households, households headed by the relatively young, larger households, rural households and households farther from the nation’s capital, including those in the savannah belt.

Key words: Food expenditure, Ghana, households, two stage least squares, welfare.

Abbreviation

2SLS, Two stage least squares; BECE, Basic Education Certificate Examination; FAO, Food and Agriculture Organization; GSS, Ghana Statistical Service; LCH, life cycle hypothesis; MDG, millennium development goal; MSLCE, Middle School Level Certificate Examination; OLS, ordinary least squares method; PIH, permanent income hypothesis; SSA, Sub-Saharan African; UNDP, United Nations Development Programme; UNEP, United Nations Expenditure Programme;  VSCE, Vocational School Certificate Examination; WFP, World Food Programme; WHO, World Health Organization.