Non‐Farm Entrepreneurship and Household Economic Precarity in Rural Ghana

ABSTRACT Despite ongoing initiatives to improve rural livelihoods, a significant portion of the rural population continues to grapple with the challenges of earning sustainable income and maintaining economic resilience. This issue has prompted considerable research on household economic precarity in developing countries. However, the link between non‐farm entrepreneurship and economic precarity in rural households is yet to receive much attention. Consequently, this study investigates the effects of non‐farm entrepreneurship on rural economic precarity using data from Ghana's 2022 Annual Household Income and Expenditure Panel Survey across two quarters. Economic precarity is a multidimensional construct of affordability, livelihood reliability, housing stability, and healthcare coverage, whereas non‐farm entrepreneurship is a binary variable based on households' involvement in non‐agricultural business activities. We employ a panel fixed effects estimator as our benchmark model and address the potential endogeneity of non‐farm entrepreneurship using instrumental variable estimation among a host of alternative robust techniques. Our endogeneity corrected results indicate that non‐farm entrepreneurship decreases rural economic precarity. These findings are consistent across different endogeneity‐resolving techniques, alternative ways of conceptualising economic precarity, and are robust to different cut‐offs and weights used for the economic precarity index. We find that non‐farm entrepreneurship decreases economic precarity more among female‐headed households than among their male counterparts. Finally, we find that rural households with non‐farm businesses have higher incomes, which translates into lower economic precarity than households without such businesses. We recommend policies that expand rural nonagricultural opportunities, particularly those benefiting women, to boost rural economic and financial resilience for sustainable development.