Supply creating its own Demand in Ghana’s Urban Transportation: Economic Analysis of Motor Tricycle Transport System in Kumasi

Abstract

The booming motor tricycle transportation system in urban areas in Ghana offers far reaching insights for policy reform. The freedom to choose one’s means of transportation had for a long time been partly hindered through state regulation. Given the option, many urban dwellers in Ghana have chosen to switch from the traditional means of urban transport to motor tricycles. This paper assesses the economic incentives responsible for the booming motor tricycle transportation in urban Ghana. It employs a quantitative approach to analyse a survey of owners, drivers and passengers of the tricycles, to ascertain the role of supply in the creation of the current demand. A probit regression technique was used to model and analyse the likelihood of owners supplying additional tricycles and to also assess factors that determine the choice between motor tricycles and traditional modes of urban transport in Ghana. The study found that owners of tricycles who had reliable riders were 96% more likely to acquire additional tricycles than invest in some composite commodity. Also, commuters chose the tricycle above the traditional modes of urban transport because it significantly reduced their travel time. In addition, riders of the tricycles obtained gainful employment, with monetary rewards worth more than 300% of what minimum wage earners receive in Ghana. Thus, the study validates Say’s Law at the microeconomic level. Therefore, the government of Ghana would need to formally legalize the use of the tricycles for urban transportation, and institute favourable regulations, which will sustain the demand for their services.

Keywords: Demand; Ghana; Probit Model; Supply; Tricycles; Urban transportation