The Impact Of Health Insurance On Land-Related Investment In Agriculture: Evidence From Ghana

ABSTRACT Agriculture is labour intensive and output produced depends to a great extent on the readiness and value of the working labour. It has been observed that health shocks decrease the productivity and potential investments into agriculture, and perpetuates poverty among smallholder farmers. It is argued that, Health Insurance coverage for smallholder farmers can go a long way to ameliorate the impact of heath shocks and smoothen investments for farmers. However, little is known about the impact of health insurance on smallholder farmers. Ghana introduced the National Health Insurance Scheme (NHIS) in 2004 to help reduce the financial burden on household’s in the event of incurring huge health care expenses. Thus, this study using enrolment information on the NHIS examines the determinants of Health Insurance coverage amongst smallholder farmers and goes further to examine the impact of Health Insurance on agricultural investments in the form of the level of agricultural inputs used in production and the level of hired labour employed. The data for the empirical analysis is the Ghana Living Standard Survey (GLSS) wave 6 conducted in 2012/2013. The study employed a number of estimation approaches to address issues relating to endogeneity – the fact that NHIS coverage is nonrandom or in other words NHIS is not randomly assigned. To address this issue and estimate causal impact of NHIS, propensity score matching (PSM) estimations and two-stage residual inclusion model was estimated to augment the Ordinary Least Squares (OLS) estimator. The result shows that, household head characteristics such as gender, age and educational level, as well as farm size and household expenditure influences the adoption of NHIS amongst smallholder farmers. In terms of impact, estimates from propensity score matching and the two-stage residual inclusion reveals a positive and significant effect of NHIS on land investment and hired labour.