Impact of household livelihood diversification on welfare in Ghana

This paper uses the Ghana Living Standards Survey Round 6 (GLSS 6) to study the impact of livelihood diversification on welfare based on instrumental variable (IV) estimation procedure. Welfare is measured by real daily consumption expenditure per adult equivalent and asset index while livelihood diversification is measured with the count and Margalef indices. The study found that livelihood diversification has both short-run consumption gain and long-run wealth creation effect. Welfare difference among Ghanaian households is also explained by the difference in human, social, financial/productive, natural and physical assets. As such, the provision of alternative/complementary livelihood strategies for vulnerable households and financial inclusion of households are recommended. Also livelihood interventions with focus on agricultural, subsistent non-agricultural and low-paid livelihood households may be effective for promoting inclusive development.