in this sector cannot by any means be considered to be near zero. But it has a low positive value in keeping with the low wages of the labor used in the sector, and the low income of the customers it serves. Thus the large informal sector is a symptom of an economy with a low level of equilibrium income whose potential for growth is weak.

Labor force growth is high in Ghana. ILO sources estimate that the growth rate of the labor force which in the 1980s averaged about 2.7 percent will exceed 3 percent per annum in the late 1990s (United Nations 1990/91 Part 2). Very little is known about the potential for labor absorption in the agricultural sector of Ghana. It is clear from the discussion reported above that the large international emigration of labor in the seventies had led to a significant fall in agricultural output, and equally the return migration of labor in the early eighties was easily absorbed in agriculture, and was indeed accompanied by an increase in output. Thus over the range of the production function covered by this degree of change in the labor force, the marginal product of labor is seen to have had a distinctly high positive value. But it is not known what the value of the marginal product of labor would be if there is a significant increase in the labor to land ratio. The importance of cash crops, and particularly cocoa has declined in the agricultural economy as the international price of cocoa has fallen. Thus much depends on the growth of the food sector and the nature of technological progress in it. An important consideration in this connection is that the growth rate of the food sector will depend a great deal on the extent and composition of public investment.

The development of the smallholder sector requires improvement in a whole array of factors including limited availability of technological packages, poor delivery of inputs, weak agricultural services, limited availability of credit and inadequate infrastructure. While some of these deficiencies require diversion of effort from weak public institutions to private providers (e.g., supply of fertilizer and seeds), some cannot do without active public participation. This is particularly true of extension services and rural infrastructure including road systems. Unlike manufacturing, where demand conditions and supply of skilled labor might be binding or additional constraints to output apart from investment, agricultural output is likely to be directly responsive to the level of effective public investment. In the absence of major shifts to mechanizationwhich seems unlikely in the existing technological scenario-emiployment in agriculture could be expected to increase with production. A greater effort at increasing the investment directed to the agricultural sector would seem to be the surest way of increasing the prospects of labor absorption in the medium term.<sup>4</sup> While something could be achieved by changing the composition of public investment, the objective would be difficult to meet if over-all investment ratios remain low. We have noted in the discussion above that the over-all investment ratio, after recovering sharply in the eighties has stagnated in the nineties. What is more, the attempt to raise the public investment rate has been at the cost of private investment. In developed economies, if investment rates are seen to have reached a ceiling below the

> 4See Annex 2 for a discussion on alternative growth and poverty scenarios for Ghana for the period 19922000. The results clearly reveal the importance of accelerated agricultural growth for sustainable poverty reduction.

51