Aspirations and Investments in Agricultural Risk Mitigation Strategies

Abstract

ABSTRACT This study examines the relationship between aspirations gaps and agricultural diversification in an irrigated ecology in Northern Ghana. Using panel data and a fixed‐effects model, we find that moderate increases in aspirations provide optimal incentives for agricultural diversification, while aspirations that exceed a threshold lead to aspiration failure. The effects are pronounced in adult‐headed households, those with drought‐index insurance, and households receiving remittances. These findings are robust across different transformations and conceptualizations of livestock and crop diversification. The results underscore the importance of psychological factors in investment, indicating that development partners should consider these elements when designing agricultural interventions.