The distribution of welfare in Ghana, 1987-88

hIVES LSM - 75 MARCH 1991 L-ivinig Stan. -ards Measurt iiLe StuA WorLin; 1'Po er N.; . -, The Distri bution of W'elfare in C hanA , -,- -- Paul Glewwe and Kwaku A. Twum-Baah  LSMS Working Papers No. 6 Household Survey Experience in Africa No. 7 Measurement of Welfare: Theory and Practical Guidelines No. 8 Employment Data for the Measurement of Living Standards No. 9 Income and Expenditure Surveys in Developing Countries: Sample Design and Execution No. 10 Reflections on the LSMS Group Meeting No. 11 Three Essays on a Sri Lanka Household Survey No. 12 The ECIEL Study of Household Income and Consumption in Urban Latin America: An Analytical History No. 13 Nutrition and Health Status Indicators: Suggestions for Surveys of the Standard of Living in Developing Countries No. 14 Child Schooling and the Measurement of Living Standards No.15 Measuring Health as a Component of Living Standards No.16 Procedures for Collecting and Analyzing Mortality Data in LSMS No. 17 The Labor Market and Social Accounting: A Framework of Data Presentation No. 18 Time Use Data and the Living Standards Measurement Study No. 19 The Conceptual Basis of Measures of Household Welfare and Their Implied Survey Data Requirements No. 20 Statistical Experimentation for Household Surveys: Two Case Studies of Hong Kong No. 21 The Collection of Price Data for the Measurement of Living Standards No.22 Household Expenditure Surveys: Some Methodological Issues No.23 Collecting Panel Data in Developing Countries: Does It Make Sense? No. 24 Measuring and Analyzing Levels of Living in Developing Countries: An Annotated Questionnaire No.25 The Demand for Urban Housing in the Ivory Coast No. 26 The C6te d'Ivoire Living Standards Survey: Design and Implementation No. 27 The Role of Employment and Earnings in Analyzing Levels of Living: A General Methodology with Applications to Malaysia and Thailand No. 28 Analysis of Household Expenditures No.29 The Distribution of Welfare in C6te d'Ivoire in 1985 No. 30 Quality, Quantity, and Spatial Variation of Price: Estimating Price Elasticities from Cross-Sectional Data No. 31 Financing the Health Sector in Peru No. 32 Informal Sector, Labor Markets, and Returns to Education in Peru No.33 Wage Determinants in Cote d'Ivoire No. 34 Guidelines for Adapting the LSMS Living Standards Questionnaires to Local Conditions No. 35 The Demand forMedical Care in Developing Countries: Quantity Rationing in Rural C6te d'Ivoire No. 36 Labor Market Activity in C6te d'Ivoire and Peru No. 37 Health Care Financing and the Demand for Medical Care No. 38 Wage Determinants and School Attainment among Men in Peru No.39 The Allocation of Goods within the Household: Adults, Children, and Gender No.40 The Effects of Household and Community Characteristics on the Nutrition of Preschool Children.: Evidence from Rural Cote d'Ivoire No. 41 Public-Private Sector Wage Differentials in Peru, 1985-86 No.42 The Distribution of Welfare in Peru in 1985-86 (List continues on the inside back cover)  The Distribution of Welfare in Ghana, 1987-88  The Living Standards Measurement Study The Living Standards Measurement Study (Ls) was established by the World Bank in 1980 to explore ways of improving the type and quality of house- hold data collected by statistical offices in developing counties. Its goal is to foster increased use of household data as a basis for policy decisionmaking. Specifically, the TSMS is working to develop new methods to monitor progress in raising levels of living, to identify the consequences for households of past and proposed gov- ernment policies, and to improve communications between survey statistcians, an- alysts, and poligcmakers. The LSv Worlkng Paper series was started to disseminate intermediate prod- ucts from the ISMS. Publications in the series include critical surveys coverng dif- ferent aspects of the LSMS data collection program and reports on improved methodologies for using Living Standards Survey (LSS) data. More recent publica- tions recommend specific survey, questionnaire, and data processing designs, and demonstrate the breadth of policy analysis that can be carried out using us data.  ISMS Worldng Paper Number 75 The Distribution of Welfare in Ghana, 1987-88 Paul Glewwe and Kwaku A. Twum-Baah The World Bank Washington, D.C.  Copyright 0 1991 The International Bank for Reconstuction and Development/THE WORLD BANK 1818 H Street, N.W. * Washington, D.C. 20433, U.SA. All rights reserved Manufactured in the United States of America First printing March 1991 To present the results of the Living Standards Measurement Study with the least possible delay, the typescript of this paper has not been prepared in accordance with the procedures appropriate to formal printed texts, and the World Bank accepts no responsibility for errors. The findings, interpretations, and conclusions expressed in this paper are entirely those of the author(s) and should not be attributed in any manner to the World Bank, to its affiliated organizations, or to members of its Board of Executive Directors or the countries they represent. The World Bank does not guarantee the accuracy of the data included in this publication and accepts no responsibility whatsoever for any consequence of their use. Any maps that accompany the text have been prepared solely for the convenience of readers; the designations and presentation of material in them do not imply the expression of any opinion whatsoever on the part of the World Bank, its affiliates, or its Board or member countries concerning the legal status of any country, terrtory, city, or area or of the authorities thereof or concerning the delimitation of its boundaries or its national affiliation. The material in this publication is copyrighted. Requests for permission to reproduce portions of it should be sent to Director, Publications Department, at the address shown in the copyright notice above. The World Bank encourages dissemination of its work and will normally give permission promptly and, when the reproduction is for noncommercial purposes, without asking a fee. Permission to photocopy portions for classroom use is not required, though notification of such use having been made will be appreciated. The complete backlist of publications from the World Bank is shown in the annual Index of Publications, which contains an alphabetical title list (with full ordering information) and indexes of subjects, aulthors, and countries and regions. The latest edition is available free of charge from the Publications Sales; Unit, Department F, The World Bank, 1818 H Street, N.W., Washington, D.C. 20433, U.S.A., or from Publications, The World Bank, 66, avenue d'I6na, 75116 Paris, France. ISSN: 02534517 Paul Glewwe is an economist in the Welfare and Human Resources Division of the World Bank-s Population and Human Resources Department. Kwaku A. Twum-Baah is a statistician at the Ghana Statistical Service in Accra, Ghana. Library of Congress Cataloging-in-Publication Data Glewwe, Paul, 1958- The distribution of welfare in Ghana, 1987-88 / Paul Glewwe and Kwaku A. Twum-Baah. p. cm.-(LSMS working paper, ISSN 0253-4517; no. 75) Includes bibliographical references. ISBN 0-8213-1763-6 1. Income distribution-Ghana. 2. Cost and standard of living- -Ghana. 3. Consumption (Economics)-Ghana. 4. Poor-Ghana. I. Twum-Baah, Kwaku A. II. Title. Ill. Series. HC1060.Z91545 1991 339.2'09667-dc2O 91-8099 - t:~~~~~~~~~~~~~~~ir?  -v ABSTRACT This paper describes the distribution of welfare in Ghana in 1987-88, as measured by consumption expenditures. The data used are from the first year of the Ghana Living Standards Survey. While primarily descriptive, the paper contains information with clear policy implications. Several findings stand out. First, rural residents are, on average, clearly worse off than urban residents. The poorest group are residents of the rural savannah while the wealthiest are those who live in the capital, Accra. Second, education of the household head is strongly positively correlated with household welfare. Third, households where the head is self-employed, especially in agriculture, are generally found at the lower end of the distribution of welfare, while those headed by a wage earner, either in the private or the public sector, are better off. Fourth, unemployment among household heads is not correlated with household welfare. Finally, although the poorer groups are less likely to seek medical help when they are ill, malnutrition among young children in these groups is not much higher than that among the better off groups.  - vi - ACKNOWLEDGEMENTS This report is based on the first year of data from the Ghana Living Standards Survey (GLSS), which was conducted by the Ghana Statistical Service under the general management of the Government Statistician, Dr. E. OtiBoateng, and his Deputy, Dr. Kwaku A. Twum-Baah. A special note of thanks goes to the GLSS core team, particularly Mr. Kwaku Amoo-Appau, Mr. Moses Awoonor-Williams, Ms. Philomena Mensah, and Mr. Samuel Bannerman for assisting in the data collection. For comments and discussion on previous drafts of this report, thanks are due to Ms. Polly Jones, Mr. Steven Mink, Dr. Fred T. Sai, Mr. T. K. Kumekpor, Mr. Amoo-Appau, and participants in seminars at the World Bank in Washington and at the Department of Sociology of the University of Ghana at Legon. We are especially grateful to Dr. OtiBoateng for giving the paper a final brush-up. Finally, we are indebted to Ms. Angela Murphy for typing several drafts of the report. Any shortcomings of the paper, however, remain the responsibility of the authors.  - vii - TABLE OF CONTENTS Page I. The Ghanaian Economy and Society ............... . 1 A. Introduction ....................................................... I B. Ghana at a Glance .................................................. 2 C. Developments in the Economy since the 1970s .................... 5 D. Programmes for the Future.o. ..... ........... ..... .....***07 II. Measurement of Welfare - Theory and Application ........................1O A. Economic Theory and Welfare Measurement ..................... B. Application of the Theory to Ghana ...................o..........13 III. Distribution of Welfare as Measured by Consumption Expenditure Levels.19 A. Distribution of Welfare by Area of Residence....................... 25 B. Sex of the Head of Householdoo..o .... ............oo.......ooo27 C. Religion of the Head of Household ........27 D. Education of the Head of Household. .......o...................... 28 E. Employer and Occupation of the Head of Household.o................ 31 F. School Attendance by Welfare Groupso..o..... o............o .... 34 G. Housing Characteristics by Welfare Groups . .. .... 35 H. Ownership of Durable Coods by Welfare Groups.............. o..... 41 IV. Poverty in Ghana ....... ..... o ..... o.... o..o.o.oo....... o...... o ... oo......o.....44 A. General Characteristics of Poor Households ................o44 B. Characteristics of the Heads of Poor Household . . ... 47 C. Housing Characteristics Among the Poor .. 49 D. Health Status Among the Poor. .... .................... . . . . . . . . ..... ..... 51 V. Inequality Analysis Using Group Decomposable Indices.o....o. .......... 56 A. Expenditure Inequality in Ghana and Four Other Developing Countriesoo ..... ...o...... .o*o.o.o.o............................56 B. Inequality Decompositions by Area of Residence.. .. .... ....oo-58 C. Inequality Decompositions by Education of Head of Householdo ..... 60 D. Inequality Decompositions by Religious Affiliation.,..............o62 VI. Summary, Policy Implications and Suggestions for Future Research ........64 A. Summary of Findings. ...... ...... 64 B. Policy Interventions to Reduce Inequality and Poverty...... .......68 C. Suggested Areas for Future Research ...........................70 Appendices: A. Description of the Ghana Living Standards Survey ......... 73 B. Construction of Price Indices Using the GLSS Price.......... 86 Questionnaire C. Measurement of Inequality.. ... ... .......................... . 89 References o ... ............................ ......... oo.oo ......o...o..93 Map: Sampling Areas of Living Standards Survey 1987-88 continued  - viii - TABLE OF CONTENTS-continued LIST OF TABLES Table 1. Composition of Household Consumption in Ghana, 1987-88...........16 Table 2. Distribution of Consumption Expenditures by Expenditure Deciles: Ghana 1987-88 ................................................ ................ 17 Table 3. Characteristics of Households by Location: Ghana 1987-88 .........20 Table 4a. Characteristics of Households Within Quintiles: Ghana 1987-88 .... 21 Table 4b. Characteristics of Households Across Quintiles: Ghana 1987-88 .... 23 Table 5. School Attendance in Ghana by Quintiles and Area of Residence 1987-88 .*..................... ........... ............. ........... 36 Table 6. Housing Characteristics by Location: Ghana, 1987-88... ..........38 Table 7a. Housing Characteristics Within Quintiles: Ghana, 1987-88...... ...39 Table 7b. Housing Characteristics Across Quintiles: Ghana, 1987-88 ........40 Table 8. Ownership of Durable Goods, Ghana 1987-88. .................643 Table 9. General Characteristics of the Poor in Ghana, 1987-88...... ....45 Table 10. Distribution of the Poor by Characteristics of Head of Household.48 Table 11. Housing Among the Poor. .... .................................... .... . 50 Table 12. Indicators of Health Status Among the Poor..................52 Table 13. Inequality in Consumption Expenditures in 5 countries ............ 57 Table 14. Consumption Expenditures Inequality - Decomposed by Area of Residencex.......I....eoo.....si .i.o.b ..y ucation...... .59 Table 15. Consumption Expenditures Inequality-Decomposition by Education...61 Table 16. Consumption Expenditures Inequality-Decomposition by Religionoo..63  - 1 - I. THE GHANAIAN ECONOMY AND SOCIETY A. Introduction Ghana is richly endowed in material, natural and human resources. Yet these resources are not distributed equitably; a great part of the population and society has very limited access to these resources, while a few regions and towns have a disproportionate share of the social and economic benefits derived from the country's resource endowment. Perhaps, the best evidence of the unequal distribution of Ghana's wealth and resources is the duality of the economy and society, that is, the unequal distribution between urban and rural areas, between the North and the South, and between the formal, modern wage sector and the informal, traditional subsistence sector. The basic objectives of this paper would be to investigate the extent of this unequal distribution of welfare in Ghana and to identify the characteristics of the poor in the society. The paper would attempt, in this regard, to offer some tentative hypotheses or explanations on the causes for the inequality and poverty found in Ghana. The paper is divided into six sections. Section I provides a background to the paper by examining some features of the economy and society of Ghana. Section II discusses the theory of economic welfare measurement and how it can be applied to Ghana, using household survey data collected between September 1987 and August 1988. Section III presents a descriptive analysis of the distribution of welfare as an application of the discussion in Section II. Sections IV and V focus on the measurement of poverty and inequality, respectively, while Section VI discusses the policy implications of the  -2- research findings, with suggestions for future research. The Appendices set out in greater detail some of the background information readers may need. B. Ghana at a Glance On 6 March, 1957 Ghana became the first African nation, south of the Sahara, to gain independence from colonial rule. Three years later, on 1 July, 1960 Ghana became a sovereign republic within the British Commonwealth. The country is divided into ten administrative regions (see map inside back cover). Lying between latitudes 110 11'N, and 40 44'N and between longitudes 1