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Tanzania’s Path to Poverty Reduction and Pro-Poor Growth

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STORY HIGHLIGHTS

  • The 2019 Tanzania Poverty Assessment highlights Tanzania’s continued economic growth and poverty reduction over the past 10 years
  • The analysis notes that continued efforts by the government to improve service delivery helped to drive reduction in poverty
  • However, the report warns that a large proportion of the population remains vulnerable to falling into poverty and provides recommendations to increase jobs and drive growth

DODOMA, December 11, 2019 –  During the past decade, Tanzania recorded sustained economic growth and a persistent decline in poverty, according to a new World Bank poverty analysis.

The  2019 Tanzania Mainland Poverty Assessment  notes that poverty decreased by eight percentage points in 10 years, down from 34.4% in 2007 to 26.4% in 2018. Country poverty assessments provide information on the causes and impact of poverty in a country, and examine how public policies, expenditures and institutions affect poor citizens.

“Continued government efforts to improve living conditions have resulted in a sustained increase in access to basic services and improvements in human capital outcomes, which in turn have helped to reduce poverty,” said Bella Bird, World Bank Country Director for Tanzania, Malawi, Zambia and Zimbabwe. “The sustained reduction in poverty is welcome news but it is important for Tanzania to accelerate the pace of poverty reduction as the number of poor people remains high.” 

Today, Tanzania records 14 million poor people, up from 13 million in 2007. Moreover, the report notes that a significant proportion of the population remains vulnerable to falling into poverty and about half of the population continues to live below the international poverty line of $1.90 per person per day (in 2011 purchasing power parity.)

“Along with the reduction in poverty, the country is showing signs of a structural transformation , ” said Nadia Belhaj Hassine Belghith, Senior Economist and co-author of the 2019 Tanzania Mainland Poverty Assessment. “More people are moving towards industry and services, reducing the overall share of employment in agriculture. Those who stay in agriculture are also diversifying towards non-farm wage and self-employment.”

  Key findings from the poverty assessment include:

  • In addition to the reduction in basic needs poverty, extreme poverty (reflecting inability to meet minimum food needs) declined from 11.7% in 2007 to 8.0% in 2018. The depth of poverty also declined.
  • Most of the reduction in poverty was witnessed in rural areas, followed by urban areas outside Dar es Salaam.
  • The pace of poverty reduction however, has slowed down since 2012. During 2007–12, poverty averaged a decline of one percentage point a year, but this lowered to 0.3 percentage points per year in 2012-18.  
  • The impact of economic growth on poverty reduction has dampened in recent years. During 2007-12 a 10% increase in gross domestic product per capita growth produced a 10% decline in the proportion of poor people. This has declined to 4.5% in 2012-18.
  • Consumption growth became less pro-poor and inequality has increased. The Gini coefficient went up from 38.5 in 2007 to 39.5 in 2018.
  • Vulnerability is also still high: for every four Tanzanians who moved out of poverty, three fell into it. A large number of non-poor people living just above the poverty line are at risk of slipping below it.
  • Productive social safety nets’ programs can play an important role in reducing vulnerability to poverty. The findings suggest that without the TASAF PSSN there would be an additional one million poor people in 2018.
  • Today, poor families are burdened with a large number of dependents, lower access to basic services and particularly low human capital, limiting their potential to access productive employment opportunities. Less than one-third of Tanzanian children currently enroll in lower secondary school.
  • More importantly, poor parents pass on their poverty to their offspring. Both economic and social mobility remain low in Tanzania.
  • Significant gaps in living standards persist between rural and urban areas. Rural households lag considerably behind their urban counterparts in almost all monetary and non-monetary dimensions of poverty.
  • That said, disparities in well-being within urban areas are becoming more pronounced. Both consumption inequality and inequality of opportunity are higher in urban areas than in rural areas.
  • Beyond the rural-urban divide, significant regional disparities in living standards persist. Poverty is highest among the lake zone districts, which are further disadvantaged in terms of vulnerability to climate-change induced natural disasters.

Structural transformation, the process where people move out of low productivity agriculture into more remunerable activities, will determine whether Tanzania can pull itself out of poverty going forward, according to the report. Despite the noticeable transition of labor from agriculture to industry and services, the share of agriculture in total employment remains high (at 58%, reaching 79% among the poor) while it continues to contribute far less to value-added than these other sectors. There is also a need for further market orientation and value addition in the agricultural sector, as was discussed at the recent  launch of the  13th Tanzania Economic Update, Transforming Agriculture - Realizing the Potential of Agriculture for Inclusive Growth and Poverty Reduction .

In addition, the report notes that the more productive industry and service sectors favor the more educated and the better off, perpetuating inequities in access to productive employment opportunities. This, coupled with the distressingly low level of educational attainment in the overall population, keeps a majority of the population stuck in informal sector wage and self-employment. Most businesses remain small and unregistered, or stop operating when they are still young, and operate without fixed business location. They also lack access to formal sources of finance, limiting their growth potential.

Going forward, the report recommends that Tanzania needs to invest in human capital and skills development of its current and future workforce while increasing the job generation by key sectors that drive growth. This needs to be coupled with a better enabling environment that fosters small firms growth and survival chances, furthers agricultural transformation, and reduces vulnerability to negative domestic and international economic and weather shocks.

  • EXECUTIVE SUMMARY: Tanzania Mainland Poverty Assessment
  • PRESS RELEASE: Modest Reduction in Poverty in Tanzania: More Can Be Done to Accelerate Pro-Poor Growth
  • Tanzania Economic Update - Transforming Agriculture: Realizing the Potential of Agriculture for Inclusive Growth and Poverty Reduction
  • The World Bank in Tanzania
  • The World Bank in Africa
  • Follow World Bank Tanzania on Twitter

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10 CAUSES OF POVERTY IN TANZANIA

10 CAUSES OF POVERTY IN TANZANIA

Poverty is a complex issue that has many causes. In Tanzania, some of the main causes of poverty include lack of access to education and healthcare,

limited economic opportunities, high levels of inequality, natural disasters, and political instability.

Other factors that contribute to poverty in Tanzania include poor infrastructure, corruption, and limited access to credit and financial services.

CAUSES OF POVERTY IN TANZANIA

HERE ARE CAUSES OF POVERTY IN TANZANIA

One of the main causes of poverty in tanzania is the lack of access to education and healthcare..

Many people in Tanzania, especially in rural areas, do not have access to quality education and healthcare services. This lack of access can limit people’s ability to improve their socioeconomic status and make it difficult for them to escape poverty.

Another major cause of poverty in Tanzania is the limited economic opportunities available to many people.

Many people in Tanzania rely on agriculture for their livelihoods, but the agricultural sector is often affected by droughts and other natural disasters. Additionally, many people lack the necessary skills and education to take advantage of other economic opportunities that may be available.

Inequality is also a major cause of poverty in Tanzania.

Despite some progress in recent years, Tanzania still has high levels of inequality, with a small number of people controlling a disproportionate amount of wealth. This inequality can make it difficult for people at the bottom of the socioeconomic ladder to climb up and improve their lives.

Natural Disasters

Natural disasters, such as droughts and floods, exert a significant toll on poverty in Tanzania. This East African nation is vulnerable to these extreme climatic events due to its geographic location and dependence on agriculture.

Droughts parch the land, withering crops and decimating agricultural livelihoods. Crops serve as the primary source of sustenance and income for many Tanzanians, so their destruction triggers a cascade of economic hardships. Homes, too, are not spared from the fury of floods and storms, leaving families homeless and vulnerable.

Political Instability

Political instability casts a shadow of uncertainty over Tanzania’s economic prospects, fostering an environment ripe for poverty. Investors and businesses are reluctant to pour resources into an unstable country, fearing losses due to unpredictable changes in governance, policies, and regulations.

The absence of investment inflow curtails job creation, stymies economic growth, and amplifies poverty. Furthermore, periods of political turmoil often lead to diversion of resources from poverty alleviation programs to crisis management, leaving vulnerable populations without essential support.

Poor Infrastructure

Lack of basic infrastructure perpetuates the cycle of poverty in Tanzania. Inadequate access to clean water and electricity hinders productivity and human development. Without reliable power sources, businesses are handicapped, job opportunities remain limited, and educational institutions struggle to provide quality learning experiences.

Absence of clean water not only jeopardizes health but also necessitates labor-intensive efforts to secure this fundamental resource, diverting time and energy from income-generating activities. Inadequate roads and transportation networks restrict market access and impede economic diversification.

Corruption is a pervasive issue that exacerbates poverty in Tanzania. Funds intended for public services and poverty alleviation programs are often siphoned off or misused by corrupt officials. This embezzlement deprives citizens of crucial resources for education, healthcare, and social welfare. Additionally, corruption creates barriers for businesses, limiting economic growth and job creation. The lack of transparency and accountability in governance undermines public trust, leading to decreased participation in poverty reduction initiatives.

Finally, limited access to credit and financial services can also be a cause of poverty in Tanzania.

Many people, especially in rural areas, do not have access to the financial services they need to start or grow businesses, invest in their education, or otherwise improve their lives.

In conclusion, poverty in Tanzania is a complex issue with many causes. Some of the main causes of poverty in Tanzania include lack of access to education and healthcare, limited economic opportunities, high levels of inequality, natural disasters, political instability, poor infrastructure, corruption, and limited access to credit and financial services.

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Home » Latest Updates » Poverty in Tanzania: significant movement but no net gain

Poverty in Tanzania: significant movement but no net gain

30 March, 2022

Using innovative statistical methods, we reveal that Tanzania’s steady national poverty rate masks a much more precarious reality for households.

causes of poverty in tanzania essay

A solid understanding of the factors that shape persistent poverty and vulnerability in “normal” times is an essential requirement for judicious policy formulation in exceptional times.’    

After decades of progress, and even before the emergence of COVID-19, the pace of poverty reduction has been slowing. In Tanzania, the poverty rate across the total population has remained stubbornly stable, falling by just 6% between 2012 and 2018 (compared with 18% over the previous four years).   And this is despite strong economic growth during the same period. Now, as the world grapples with the added challenge of COVID-19, it is even more critical that we develop effective policies and programmes to end poverty in all its forms. But for this we need to know much more than these top-level trends; we need to know about the nature of poverty, who it affects and how this changes.

Through innovative statistical methods and modelling, we have been able to fill in the gaps in real-world data and develop a detailed picture of poverty dynamics in Tanzania. Our analysis, which applies adapted ‘synthetic panel’ methods to  national household survey data for 2011/12 and 2017/18, reveals a much more precarious reality beneath the country’s seemingly  . According to these new estimates, more than 12% of Tanzania’s population were poor in both 2012 and 2018 (persistent poverty) – meanwhile a much larger share of households (30%) were poor in either period. This second figure illustrates significant movement into and out of poverty at the household level; in just six years, the ‘poor’ or ‘not poor’ status of a third of all Tanzanians changed. For example, of those people that were ‘not poor’  in 2012, a fifth were poor in 2018

Synthetic panel data can also tell us about the factors that are associated with poverty vulnerability and mobility. By looking at these factors within the context of early findings on the impact of COVID-19, we can suggest where Tanzania might most effectively focus its poverty reduction strategies.

Firstly, there is an undeniable need to provide a tailored policy response to people directly affected by the current crisis . COVID-19 and efforts to control its spread, such as lockdowns and border closures, have caused a major slowdown in the global economy. During 2020, the world lost an equivalent of 255 million fu ll-time jobs as businesses shut, markets disappeared and people were unable to work. According to the World Bank’s 2021 rapid assessment surveys Tanzanians operating or employed in informal, nonfarm microenterprises have suffered considerable loss of income, but also that the pandemic’s economic impact is concentrated in urban settings (particularly Dar es Salaam). Our analysis finds that before the pandemic these households were not likely to be persistently poor or vulnerable to becoming poor. Given that existing poverty reduction strategies focus largely on people living in poverty in rural areas and farm work – factors which we find are associated with persistent poverty and continual downward mobility – these policies may not be suited to households made newly vulnerable by the direct economic impacts of COVID-19.

Secondly, policymakers need to maintain, if not redouble, efforts to address structural issues to improve the situation of people in persistent poverty and reduce their vulnerability in the face of shocks and stresses . We find a large number of households in Tanzania experience persistent poverty or are vulnerable to impoverishment. And although these poorer, more vulnerable households may be less directly affected by the pandemic’s immediate economic impacts, they may be much worse off longer term. The current crisis has slowed growth and disrupted the engines that enable escapes from poverty in Tanzania – for example, employment outside of agriculture and rural-to-urban migration. Poorer and more vulnerable Tanzanians may also be more affected by other aspects of the pandemic, including being at greater risk from the disease itself given their limited access to healthcare. These households have significantly more limited resources to start with (e.g. savings, livestock or other assets), and without action to address the structural challenges that underlie their vulnerability, their situation could worsen critically. In particular, our synthetic panel analysis reveals three areas of particular focus:

  • Continue to promote policies that raise permanent incomes . Vulnerability to poverty in Tanzania is characterised by a large share of households being only just above the poverty line and by sizeable fluctuations in income that put even more economically  secure  households at risk of impoverishment.
  • Help households to keep children in school. Education beyond primary level is the factor most strongly associated with an from poverty in our analysis. We also find that that large households with many children suffer disproportionately from persistent poverty and downward mobility, and previous evidence has told us that taking children out of school is one of the ways in which poorer families manage shocks and stresses.
  • Explore the role of rural diversification in alleviating poverty, but recognise that it is not a panacea. In Tanzania, poverty is a predominantly rural phenomenon, with rural areas showing higher levels of persistent poverty, downward mobility and vulnerability to poverty. Outcomes for rural households are better on average if the head of household is engaged in nonfarm work, but they are also more likely to be classified as vulnerable, which suggests the fragility of progress gained.

Read the full paper here .

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Growth and Poverty in Sub-Saharan Africa

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11 Growth and Poverty Reduction in Tanzania

  • Published: April 2016
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After many years of relatively slow growth, Tanzania’s national accounts data report accelerated aggregate growth since around 2000. The chapter shows that there has been slower growth in private consumption and in sectors such as agriculture, where most of the poor work and live. The household survey data documents a limited reduction in consumption poverty over the period, and what poverty reduction there has been has mostly occurred in Dar es Salaam. Indicators of non-monetary poverty have gradually improved over the past twenty years but significant differences across the country remain. The economic growth story is presented over a longer period of time and then in more detail over the period covered by four Household Budget Surveys. A discussion of the macroeconomic composition of growth considers the likely implications for progress in poverty reduction.

11.1 Introduction

Tanzania is the fifth largest country in sub-Saharan Africa in terms of population, accounting for around 5 per cent of the region’s people. It is a major economy in East Africa and an active member of the East African Community. Tanzania is also actively involved in Southern African discussions, being a member of the Southern African Development Community (SADC).

Julius Nyerere, the first President of Tanzania from shortly after its independence in 1962 until 1985, pursued a development policy based on a vision of African socialism, in particular between 1967 and the late 1970s. The economy deteriorated sharply over this period, leaving Tanzania as one of the poorest and most aid-dependent countries in the world. At the same time, Tanzania made progress in many aspects of social development. From the 1970s onwards, Tanzania increasingly borrowed from the IMF and the World Bank; and after Nyerere’s departure in 1985, the country started to undertake reforms in order to pursue more market-oriented policies. Over time, better economic performance followed, though growth remained slow even in the 1990s. Since around 2000, Tanzania has reported an improved economic growth performance.

Tanzania is also by now well known for not having been able to translate this growth into a significant reduction in monetary poverty. This apparent contrast, which has dominated recent literature on Tanzania’s economic performance, is an important focus of this chapter. Authors who have also addressed this conundrum include Atkinson and Lugo ( 2010 ), Demombynes and Hoogeveen ( 2007 ), Hoogeveen and Ruhinduka ( 2009 ), Kessy et al. ( 2013 ), Mashindano et al. ( 2011 ), Mkenda et al. ( 2010 ), Osberg and Bandara ( 2012 ), Arndt et al. ( 2013 ), and World Bank ( 2007 , 2012 , 2013 ). The general conclusion from these studies is that growth and consumption-based poverty are in several respects ‘delinked’ (Pauw and Thurlow 2011 ). The GDP elasticity of poverty reduction of around −0.21 for the period 2001–7 illustrates this weak effect. While more recent data suggest a possible improvement (the elasticity increasing to −0.80 during the period 2007–12), the available data continue to point to a weak link between economic growth and monetary poverty reduction.

Reflecting the above observation, this chapter begins by analysing the recent pattern of growth in Tanzania and considers the likely consequences of this for poverty reduction, over a period characterized by large increases in the prices of food and fuel. The first part of the chapter focuses on the record in terms of monetary poverty and its seeming unresponsiveness to growth. Much of the focus is on the period since 2000 when the seeming disconnect arises. The 1990s were characterized by limited growth and limited poverty reduction between 1991/2 and 2001 (from 38.6 per cent to 35.7 per cent). As noted, the national accounts data report improved growth in per capita GDP and average per capita private consumption since around 2000, while the rate of monetary poverty reduction has continued to be slow. Four main household surveys are used for the analysis, the Household Budget Surveys (HBS) conducted in 1991/2, 2000/1, 2007, and 2011/12. 1 We also draw on Demographic and Health Surveys (DHS) to assess progress in non-monetary domains.

Key to understanding the difficulties in analysing how growth and poverty interact in Tanzania is the fact that there are serious issues with the underlying data. These concern both the national accounts estimates of economic growth (Jerven 2011 ) and the household survey evidence on poverty trends (Eele et al. 2000 ; World Bank 2015 ). Both are decidedly questionable in tracking changes over time, which is a central concern addressed in this chapter. To add to that, the national accounts were then rebased in November 2014 (an issue not addressed in detail here), but this does not change the overall growth story from the national accounts. This data uncertainty is one key feature of this chapter. Nevertheless, both the surveys and the national accounts suggest a somewhat slower growth in real private consumption which is then somewhat less out of line with the progress in relation to monetary poverty. Importantly, the non-monetary indicators show reasonably good progress since 1991.

The chapter first presents in section 11.2 the economic growth story over a longer period of time and then in more detail over the period covered by the four Household Budget Surveys. A discussion of the macroeconomic composition of growth considers the likely implications for progress in poverty reduction. The responsiveness of poverty to growth is discussed in detail in section 11.3. This discussion highlights major differences between the national-accounts-based measures of growth and the growth in average household consumption from the household surveys. How responsive poverty is to growth depends critically on how growth is measured. Section 11.4 then looks at the nature of consumption poverty reduction in more detail. While results for the more recent period might suggest a more positive poverty reduction record, concerns about data comparability and the adequacy of price adjustments raise the question of how robust this finding is. Evidence on selected, more straightforwardly measured non-monetary indicators of deprivation is briefly reviewed in section 11.5 , after which section 11.6 concludes.

11.2 The Recent Pattern of Growth in Tanzania

The data presented in this section precede the rebasing of the national accounts in November 2014. Though the data rebased in 2007 are now available, currently available data do not provide information before 2007 and so do not enable a longer-term consideration of growth. We use the original data here, though comment on any points of difference over the 2007–12 period evident in the rebased data; these are generally small.

Data from World Development Indicators on real GDP in local currency values from 1988 to 2013 (prior to the rebasing) are presented in Figure 11.1. This chart confirms that the 1990s were characterized by at best modest growth, as well as some periods of decline. By contrast since 2001 annual growth in real per capita GDP averaged 3.9 per cent a year, and was never less than 2.9 per cent, which occurred in 2009 following the financial, food, and fuel crises.

Growth of real local currency per capita GDP in Tanzania

A more detailed presentation of the national accounts is set out in Table 11.1 corresponding to the periods covered by the four Household Budget Surveys (HBS). This confirms the difference between the 1990s and the period since 2000. Real GDP in 2001 prices grew at an average rate of 3.8 per cent per annum between 1992 and 2001, by 7.2 per cent per annum between 2001 and 2007, and 6.6 per cent between 2007 and 2012 (6.2 per cent in 2007 prices using the rebased data). Population growth averaged 2.9 per cent over the 1992–2012 period, so this translates into slow per capita GDP growth in the 1990s, and then more satisfactory, though by no means impressive, growth in real per capita GDP since 2001.

Note : relates to period 1991–2001 instead of 1992–2001 due to missing data for 1992.

A disaggregation of the overall growth rate provides important clues about its expected poverty reduction impacts. Looking first at GDP by expenditure component, the national accounts estimate of private consumption grew by only 0.9 per cent per annum between 1991 and 2001; but by 6.6 per cent and 6.9 per cent per annum over the periods 2001–7 and 2007–12 respectively (5.7 per cent between 2007 and 2012 with the rebased data). Private consumption therefore fell in per capita terms between 1991 and 2001. Importantly, public consumption grew much faster than private consumption over each of these periods.

There were also very large increases in investment over each of these subperiods, generally at much faster rates than consumption. Available data do not enable a public–private disaggregation for the 1992–2001 years. The government predominantly accounted for the investment growth between 2001 and 2007, while between 2007 and 2012 private investment dominates, including investment for natural resource exploitation.

It is also clear that Tanzania had a sharply negative balance of trade throughout this period. Imports supported this consumption and investment growth. In 1991 net exports were −5.8 per cent of GDP; by 2007 and 2012 this figure had reached −15.0 and −26.8 per cent respectively. The trade deficit growth from 1991 to 2007 probably reflects aid, while the deficit in 2007–12 is likely related to offshore natural gas and other resource investments (predominantly undertaken by the private sector).

The investments that have taken place form part of the explanation of the faster growth in the 2000s. The increased public consumption, and public investment in the first period, have implications for non-monetary outcomes for which government provision is important and help to set the stage for faster growth in the domestic economy. The relatively slow increase in aggregate private consumption taking place over much of this period suggests that slower progress in reducing monetary poverty might be expected.

While data are not available to analyse the sectoral pattern of the growth in real GDP from 1992 to 2001, data in current prices for this period suggest faster growth in industry/construction and services compared with agriculture. The detailed pattern of real growth is available for the second and third sub-periods in Table 11.1 . Particularly fast-growing subsectors over these periods include first and foremost communications, followed by financial intermediation, construction, transport and communication, manufacturing, trade and repairs, and in the earlier sub-period mining and quarrying. All showed significant growth rates. Again agriculture grew much more slowly over this period. Growth performance seems to have been better in urban areas than in rural areas, where poverty is concentrated.

The above review relies on aggregate macroeconomic figures. Both the expenditure composition of growth, which is oriented more to investment and government spending as opposed to private consumption, and its sectoral pattern, which is oriented towards urban sectors, suggest slower progress in reducing consumption-based poverty than might be presumed from headline GDP growth.

11.3 Micro-Level Evidence on Consumption Poverty in Tanzania and its Responsiveness to Growth

In this section, we turn to household-level data. Microeconomic analysis is possible based on the four Household Budget Surveys, conducted by the National Bureau of Statistics in 1991/2, 2000/1, 2007, and 2011/12. These are nationally representative surveys of the mainland Tanzania population. Among other things, they collect the data to estimate household consumption, which can then be used to measure living standards as total real household consumption per adult equivalent. There were some differences in the survey questionnaires used through time. Some revisions in 2011/12 compared with earlier rounds are of particular relevance. As a result, there were methodological differences in the analysis conducted across the two latest surveys, compared with the analysis originally done on the first three surveys. For this reason, two different estimates of poverty in 2007 have been made here in order to compare like with like.

The summary national-level poverty headcount estimates from these data, as published by the National Bureau of Statistics (1991/2–2007) (Government of Tanzania 2009 ) and the World Bank ( 2007 –2011/12) are presented in Table 11.2. The poverty headcount in 1992 was 38.6 per cent. Estimates for 2000/1 and 2007, based on consumption measures constructed to be as comparable as possible, showed poverty headcounts of 35.7 per cent and 33.6 per cent respectively. Progress in reducing the poverty headcount over this fifteen-year period therefore appears to be quite slow, and the absolute numbers of poor people rose by an estimated 3.3 million. Between 2007 and 2011/12 the poverty headcount is estimated to have fallen from a revised estimate of 34.4 per cent in 2007 to 28.2 per cent in 2011/12. This corresponds to a reduction in the absolute numbers of poor people by around 670,000.

Note : National accounts data in constant (2001) prices. National accounts estimates normalized on total population, including households in institutions not included in the HBS estimates. n.a denotes not available.

Given the concern expressed at the beginning at the lack of responsiveness of poverty to growth, these figures are used next as a basis for estimating the growth elasticity of poverty reduction. Their construction for the three subperiods under consideration here is reported in Table 11.2. Two ways of doing this are pursued: one based on national accounts aggregates, and secondly an approach using the estimated growth in household consumption from the survey data.

In using national accounts data, the growth elasticity can be computed with respect to growth in per capita GDP or growth in per capita private consumption. With respect to per capita GDP, the elasticities are low, all less than one, and especially low between 2001 and 2007 when growth was fast (per capita GDP increased by 28.5 per cent) and poverty reduction was very modest, falling by only 2.9 percentage points or 5.9 per cent. The elasticity is higher between 2007 and 2011/12, when poverty reduction was faster and growth slightly slower, yet it was still only −0.80. The elasticity with respect to per capita consumption is only slightly higher than the elasticities with respect to per capita GDP for the full period between 2001 and 2012.

Such statistics feed concerns about the poverty-reducing impact of growth in Tanzania. The values are low compared with several other African countries studied in this volume, to say nothing of some East Asian countries. This raises the question of what it is about the growth experience of Tanzania that results in such poverty outcomes, and what might be done to improve it in future.

When these same calculations are done in relation to the household-survey-based measure of consumption, the results paint a different picture. The growth in per capita consumption reported by the household survey data is generally much less, especially in the 2000s. Compared with the estimates of 24 and 21 cumulative per cent changes in real per capita private consumption expenditure over the 2001–7 and 2007–12 periods from the national accounts, the household surveys suggest cumulative changes over these periods of 2.9 per cent and 5.1 per cent respectively. The assessment of whether growth is effective in reducing poverty then critically depends on which of the two measures of aggregate real consumption one takes as the basis of analysis.

In Table 11.2 , when we took the ‘growth’ denominator to be the percentage change in real private consumption per capita from the national accounts, the consumption growth elasticity of poverty reduction (based on changes between 2007 and 2012) was just −0.86. If instead we measured ‘growth’ using the percentage change in mean real household consumption per capita from the two household budget surveys, the estimated ‘growth’ elasticity of poverty increases to −3.5. The elasticity estimated using household consumption is also significantly higher between 2000/1 and 2007. Poverty appears to be relatively unresponsive to growth only if the latter is measured from the national accounts. Using consumption measured in the HBSs (which is also used in the measurement of poverty itself) leads to a more optimistic assessment in terms of responsiveness—poverty did respond to much more limited ‘growth’—but a less optimistic assessment in terms of consumption growth. In this view, the core issue underlying the limited poverty reduction is the lack of growth in real household consumption.

With this background, it is important to ask which measure of consumption should be considered more reliable. At the outset, it is important to recognize that there are differences between the two approaches to estimating consumption. The national accounts measure of private consumption is a macro-founded indicator, while the household-survey-based measure is a micro-founded indicator computed primarily for purposes of poverty analysis. In addition, the estimates are obtained in very different ways. Typically, the national accounts estimate of private consumption is obtained as a residual, once absorption by firms and government is accounted for. Surveys obtain their estimates directly from household interviews, based on respondent recall or diary keeping. There are strengths and weaknesses to both; yet the underlying concepts certainly overlap closely enough to suggest that similar estimates of levels and growth rates should emerge in general.

The observation that national accounts and household-survey-based estimates of consumption can differ significantly is not an issue unique to Tanzania; rather it is an issue which has been quite widely studied. Ravallion ( 2001 : 5) concludes, ‘it is evident that when the levels or growth rates from these two data sources differ there can be no presumption that the NAS [national accounts] is right and the surveys are wrong, or vice versa, since they are not really measuring the same thing, and both are prone to errors’. While these differences can be considered a problem, they also do have an advantage, in that each source can serve to triangulate the other. Ravallion ( 2001 ) finds that the divergence between the national accounts and survey estimates of consumption is greater when surveys centre on measuring income, rather than consumption. The general practice in African surveys to rely mainly on measuring consumption would reduce the divergence between the two sources. Deaton ( 2005 ), for example, finds that the average ratio of household consumption (measured in seventy-four surveys in sub-Saharan Africa) and private consumption from the national accounts is unity. 2

The household-survey-based approach is in many ways more closely related to the analysis of poverty—indeed, that is the purpose for which they were designed. In Tanzania’s case, there is a challenge caused by a change in survey methodology between the 2007 and 2011/12 surveys. While the approach taken to measuring consumption was better in 2011/12 than in 2007, this change creates the risk that comparing the average consumption estimates from these two surveys with each other may overestimate the growth in consumption.

So, the key question is: Why are estimates of real consumption growth from the national accounts so much greater than those of the HBS? To start to explore this, we first compare nominal estimates of per capita household consumption between the national accounts and the household survey in the years of the latest two household surveys, 2007 and 2011/12. The survey estimates of average nominal consumption per capita were 306,072 TSh in 2007 and 611,691 TSh in 2011/12, while the national accounts estimates of private consumption per capita were 358,591 TSh in 2007 and 694,340 TSh in 2012. This implies annual growth rates of 14.9 per cent and 12.8 per cent respectively. Both the nominal levels of per capita consumption and their growth rates over the period are quite close despite the very different sources.

For welfare analysis, it is necessary to track changes in real consumption over time; and it is here the two approaches part company. When the series are deflated (the national accounts using a consumption component of the GDP deflator and the survey using survey-based prices and weights, both employing a single country-wide inflation estimate), there are significant differences in estimated changes in real consumption. The national accounts report a real per capita private consumption growth of 3.9 per cent per annum between 2007 and 2012, whilst the survey gives a growth in per capita household consumption of just 1.0 per cent per annum. Whereas in nominal terms the two consumption measures correspond reasonably well, when expressed in real terms, there is little correspondence between them; and they imply completely different growth and poverty scenarios.

So a major issue is the choice and reliability of the price deflators. In Tanzania, the implicit national accounts private consumption deflator indicates that prices rose by only 51 per cent between 2007 and 2012. This is marginally lower than the deflator for GDP as a whole (54 per cent). In contrast, according to the 2007 and 2011/12 HBS data, consumer prices faced by households on average rose by 90 per cent in the period. This makes a massive difference to the time trend in real household consumption. 3 A similar issue arises between 2001 and 2007, and is discussed in the studies of poverty by Mkenda et al. (2010) and Atkinson and Lugo ( 2010 ). That earlier period saw a bigger divergence between the private consumption deflator and the GDP deflator (Atkinson and Lugo 2010 ). But again, the key difference there is that between the national accounts deflator (which implied that prices increased by around 60 per cent over this period) and the survey data deflator (which implied that prices increased by 93 per cent).

The reliability of price data in Tanzania has been reviewed and analysed in detail by Adam et al. ( 2012 ). Concerns that the Consumer Price Index (CPI) underestimates inflation in Tanzania have been a long-standing issue. A major revision of the CPI computation was made in the mid-2000s, after an IMF review found that procedures of handling seeming outliers and other technical errors were creating a large downward bias. A World Bank study (World Bank 2007 ) argued that there was still some downward bias in the series. The analysis conducted by Adam et al. ( 2012 ) showed a significantly higher level of food price inflation than the NBS series, and moreover their estimates were much closer to the pattern of world price changes converted into Tanzanian Shilling values. A similar issue seems to arise for non-food. They take this as strongly suggestive evidence that the CPI was a downwardly biased measure of inflation in Tanzania, at least through 2007.

The inconsistency between the national accounts and survey consumption evidence is graphically illustrated by Sandefur ( 2013 ). Dealing with the period 2000–7, he contrasts the marginal decline in poverty based on HBS data (as seen above, 2.1 percentage points) with the significant decline in PPPUS$1/day poverty (16.7 percentage points). Since both estimates are based on the same survey evidence, the difference has to be attributed to the price series used to obtain real values, the CPI being used for the PPPUS$1/day estimate. He recalculated the PPPUS$1/day measure using instead a price deflator derived from the HBS, and obtained a much less dramatic poverty decline (just 3.5 percentage points). This shows that the price series used to establish trends in well-being and poverty plays a critical role, and explains in large measure the inconsistency between the national accounts and survey-based narratives. Sandefur ( 2013 ) clearly favours the price series obtained from the surveys. These prices are obtained directly from the household questionnaires, and reflect the prices actually paid by Tanzanian households; and they are derived from the same data used to compute the poverty indicators. Official inflation estimates (such as the CPI) are based on surveys of local urban markets only, which may not reflect the prices actually paid by most rural households; and they face the problems already identified by Adam et al. ( 2012 ).

It is also important to recognize that the CPI is normally a macro-weighted index, which gives rich household consumption baskets a large weight. The index based on the household survey places more weight on the consumption patterns of poorer households, meaning that basic items have a higher weight. Consistent with world price increases over the period, one would expect more rapid inflation in the household-survey-based index, which is more relevant for the measurement of the monetary poverty rate.

There are therefore several reasons for arguing that, for analysing the economic well-being of the population, the survey-based price data are to be preferred. A corollary question may be whether the price indices used for measuring growth (i.e. either the GDP deflators or CPI estimates) give too favourable a view of recent economic growth. In other words, are official estimates of real GDP (and private consumption) open to question?

In sum, using the best available data to assess changes over 2001–12, the main issue is not so much why Tanzania’s reported fast growth led to so little poverty reduction—rather, it is why real household consumption has grown so slowly.

11.4 The Pattern of Poverty Change in Tanzania and an Evaluation of its Robustness

In assessing the monetary poverty results in greater detail for Tanzania, it is very important to review underlying measurement issues. There are two major challenges which must be taken account of in this assessment: the issue of the comparability of the latest two of the surveys used and the adequacy of price data. On survey comparability, the data for the four available years all come from HBSs conducted by the National Bureau of Statistics. The first three surveys are considered to be largely comparable with each other. As already noted, a set of improvements in survey design and methodological approach were introduced with the 2011/12 survey (World Bank 2015 ), creating potential issues of comparability with earlier work. For the comparison between 2007 and 2011/12, the World Bank ( 2015 ) for its recent Poverty Assessment recomputed the consumption aggregates for 2007 on a comparable basis to the 2011/12 estimate. 4 This revised 2007 estimate is then not directly comparable with the earlier series; that comparison needs to be made based on the original 2007 estimate. On prices, the data available from the surveys may give a better assessment of inflation over the period between the surveys, but they are still quite inadequate for adjusting for the differences in the prices faced by different households. These issues are revisited again later in this section; to begin with we discuss the available results at face value.

The analysis in this section relies on national poverty lines. Data for the poverty headcount by survey stratum (Dar es Salaam, Other Urban and Rural) in mainland Tanzania are presented in Table 11.3 , with the two different figures for 2007 reflecting the above observation. It is clear that poverty is consistently lower in urban areas than rural areas, and that over the entire period much faster progress in poverty reduction has been experienced in Dar es Salaam compared with other strata. In particular, there were quite large poverty reductions in Dar between 1991/2 and 2000/1 and between 2007 and 2011/12. Over these periods, average real consumption in Dar grew by 4.5 per cent and 3.3 per cent per annum respectively, while the consumption growth rates were much slower elsewhere. In urban areas outside Dar, the poverty headcount fell very slowly between each survey. The same happened in rural areas between 1991/2 and 2007, while poverty seems to have fallen more in rural areas between 2007 and 2011/12. An analysis of extreme poverty, covering those households whose consumption lies below the food poverty line, shows very similar patterns and trends (not presented here).

The same table also provides estimates of national-level Gini coefficients. Here, the striking features seem to be its relatively low level (compared with neighbouring countries such as Kenya, Rwanda, and Uganda) and its relative constancy over time. The only change in the Gini coefficient happens with the recalculated 2007 consumption data, and even that change is relatively small. This finding of a moderate and stable level of inequality may seem surprising given, among other things, the faster progress shown by Dar es Salaam over this period relative to the rest of the country. We highlight that it is always a concern in household surveys that wealthier households are not adequately captured.

The nature of these changes over time can be further explored by considering growth incidence curves for the strata between each pair of years (Figures 11.2a –c). Between 1991/2 and 2000/1 the national pattern shows slow growth throughout most of the distribution, except at the very bottom and at the top (Figure 11.2a ). The stratum level curves again show that growth over this period was much faster in Dar than elsewhere. While the growth rate in Dar generally increased with the consumption level over this period, there was positive growth also at the bottom of the distribution, consistent with the poverty reduction seen there over this period. There was slower growth in other urban areas, but generally not at the bottom of the distribution where the poor are concentrated. In rural areas, consumption growth was very slow over this period, even if according to available data it was slightly higher at the bottom of the distribution.

Growth incidence curves by strata, 1991/2–2000/1

Growth incidence curves for the 2000/1 to 2007 period show very little growth overall (Figure 11.2b ). 5 There appears to be no significant change in inequality over the period; if anything, growth over this period was marginally faster at the bottom of the distribution.

Growth incidence curves by strata, 2001–7

The stratum-level GICs over the 2007 to 2011/12 period again show much faster growth in Dar es Salaam than the other strata, and in both other urban and rural areas, mean real consumption actually falls over this period (Figure 11.2c ). The distributional pattern of the curves is now one where the growth rate falls as households become better off. Reported growth is relatively faster at the bottom of the distribution, though the absolute magnitude of change is still quite small. The same pattern is seen in each of the strata.

Growth incidence curves by strata, 2007–11/12

As another representation of this, kernel density plots comparing the logarithm of consumption per adult for 2007 and 2011/12 are presented in Figure 11.3 , with a similar plot comparing 2000/1 and 2007. The 2000/1 and 2007 curves are very close to each other, with the 2007 curve very slightly to the right throughout much of the distribution. The difference between the 2007 and 2011/12 curves is observed at the bottom of the distribution only; there are fewer observations at lower values of per adult consumption in 2011/12 than was the case in 2007. This underlies the shape of the growth incidence curves seen above. This seeming change in the distributional pattern of growth raises the question of whether this is picking up a real phenomenon or whether it could reflect more effective collection of the data at the bottom of the distribution in 2011/12.

Kernel density plots of the logarithm of consumption per adult, 2000/1–7 and 2007–11/12

While the 2007 and 2011/12 data used here were computed on as comparable a basis as possible, there are still differences in the way the data were collected. It is possible that improvements in the design and implementation of HBS 2011/12 resulted in better capture of consumption by poorer households. 6 In both rounds, food consumption was collected in a fairly similar way using a diary which the interviewers monitored on a daily basis; it is not possible though to verify whether this monitoring was more carefully done in the 2011/12 survey compared with the 2007 survey. There was potentially a bigger change in how the non-food data were collected, in that in 2011/12 respondents were asked about items individually one by one while in 2007 they were asked about broader categories of goods and asked to specify items from a list. This might create a risk of fewer non-food items being reported in 2007 compared with 2011/12. The food consumption data in principle ought to be more comparable.

However, this does not seem to explain the observed outcome, in that if growth incidence curves are generated for food consumption only (which may be more comparable) for the 2007 to 2011/12 period, a similar distributional pattern of change is observed at the national level and in each stratum. As a further check on whether consumption measurement issues are responsible for the shape of these GICs, we use imputed estimates of consumption for 2007 (thus avoiding any use of measured consumption in 2007). For this, household consumption per capita in 2011/12 was regressed on ownership of assets and household characteristics, selecting only characteristics and assets available in the 2007 survey. These 2007 regressors were then used to predict consumption in 2007, allowing for the random error component. One hundred simulations were run for each household in 2007. The percentile points were identified for each one of these simulations, and in conjunction with the 2011/12 percentile points were used to compute 100 estimates of the change in consumption for each percentile which were then averaged. The results based on these simulations show that the GICs are downward-sloping through most of the range, and this also suggests relatively more rapid consumption growth among lower percentiles.

Another major concern is about the inadequate price data available for this analysis. The survey used a single deflator for inflation for all households in Tanzania between 2007 and 2011/12, whereas it is highly likely that inflation rates would have differed spatially or by income group. It is certainly plausible that poor households may have faced higher inflation overall in this period, given the greater share of food in their consumption baskets combined with the fact that food price inflation was higher over this period. If so, this would affect estimates of both poverty and inequality (Arndt et al. 2015 ). 7 While there is not sufficient information to be able to assess this, it underlines the need for considerable caution in deriving strong conclusions from the data.

Alternatively, the GICs may be representing a real pattern of change. One possible explanation might be that it captures a genuine reduction in consumption by the poorest in 2007. Comparing food shares across the four HBS surveys, it is the 2007 food share which stands out as being most different (Table 11.4 ). If poorer households did reduce their level of food consumption in response to, for example, sharply rising food prices in 2007 then the shape of the GIC between 2007 and 2011/12 may represent catch-up by the poorest households.

Another possible interpretation of the pattern of the GICs could be positive changes made by households over the period. The national accounts data suggest that growth in agriculture was not faster in the 2007–12 period compared with the 2001–7 period, so this is unlikely to be a major part of the story. The survey data do suggest some movement out of agriculture in rural areas over this period into wage work (potentially with a higher return); and, within agriculture, some increase in the number of households cultivating cash crops (who tend to be better off). There was evidence of an increase in asset ownership among the poorest 40 per cent (livestock and especially cell phones); and also evidence of an increase in access to community infrastructure (electricity, roads). It is, however, not obvious why this should affect poorer households more; one might argue that better-off households are restraining consumption levels and increasing their saving and investment in both rural and urban areas. But, these explanations are speculative and remain to be rigorously assessed.

Overall, the change in the survey methodology creates a serious question about the comparability of the 2007 and 2011/12 data despite the best efforts made to correct for this. If there are concerns about consumption having been more accurately captured at the bottom end of the distribution in 2011/12 compared with 2007, then this would affect both the shape of the GICs, and the estimates of reduction in poverty which would turn out to be overestimates. Clearly, it will be important that the consumption data are collected in a fully comparable way in future surveys.

The absence of adequate data to adjust for price changes compounds this. The survey-based deflators give a better indication of the pattern of change over this period than do national accounts or CPI-based deflators when the focus is on measuring poverty. At the same time, the survey-based deflator remains unsatisfactory because a single number for inflation or food price inflation is assumed for the entire country, which is implausible.

What we have attempted here is to make the best possible overview of the change in poverty, given the available data. The clear result from the analysis and the common thread to all the discussion above is the slow growth in real per capita consumption, which translates into relatively small poverty reduction outside of Dar es Salaam. This is one result from the consumption poverty analysis of which we can be reasonably confident.

11.5 The Non-monetary Poverty Story

We now complement the monetary poverty review by a brief analysis of trends in various non-monetary measures of deprivation. The data used are taken from the Tanzania Demographic and Health Survey (TDHS) conducted in the years 1991/2, 1996, 2004/5, and 2010 (National Bureau of Statistics and Macro International 1993 , 1997 , 2005 , 2011 ). A nationally representative sample for the whole country, including Zanzibar, was taken in each case; the sample sizes were respectively 8,327, 7,969, 10,312, and 10,300 households.

From these micro data we capture the non-monetary multidimensional nature of poverty by identifying five binary welfare indicators at the household level based on the Bristol Indictors (Gordon et al. 2003 ), taken as water, sanitation, shelter, education, and information. A household is water-deprived if the main source of drinking water is not from a pipe, tap, or well. For sanitation, the household is deprived if it has no flush toilet or ventilated improved pit toilet. A household is shelter-deprived if the main floor material is dirt, sand, dung, or planks. A household is education-deprived if the household head has not completed at least primary school. The household is information-deprived if it does not have a functioning radio or television.

Table 11.5 presents the percentage of households not deprived in each dimension, comparing the first and last year of the DHS surveys and comparing by region of the country. To start, the results show significant heterogeneity between urban and rural areas and across regions. Yet, almost all indicators demonstrate substantial improvements between 1992 and 2010, with the exception of water in several locations. Sanitation facilities improved from a very low starting value of 3 per cent in 1992 to reach 12 per cent in 2010. Water, sanitation, shelter, education, and information all show improvements at national level by respectively 7, 8, 12, 24, and 27 percentage points.

Setting aside water for a moment, changes in these indicators were more pronounced in urban areas compared with rural areas, and increases are observed in every region of the country. There is significant heterogeneity by zone in the extent of change; in sanitation and shelter, for example, large improvements are seen over this period in the Eastern zone and in Zanzibar, while changes are small in the Central zone. In relation to water, the pattern is more diverse; some zones such as Western, Northern, Southern Highlands, Lake, and Zanzibar see improvements, while others such as the Central, Eastern, and Southern zones have deterioration in water access.

The national-level figure on water access is sensitive to constraints on the time it takes to retrieve water. When we restrict not deprived in water to households within thirty minutes of the water source, water access only improves from 53 to 55 per cent. When being not deprived in water is restricted to sources within fifteen minutes, the situation shows progress is limited to a change from 39 per cent in 1992 to 35 per cent in 2010. The situation is even more pronounced in urban areas.

Different measures of deprivation are defined for under-five-year-old children, where the focus is on water, sanitation, nutrition, mothers’ education, and location of delivery as the main welfare indicators. Children under five are education-deprived if their mothers have not completed at least primary school. Children under five are nutrition-deprived if the child is more than two standard deviations below the median of the reference population in at least one of the following anthropometric measures: weight for age, height for age, weight for height. Children under five are delivery-deprived if the child was delivered in a home rather than a health facility. Sanitation is as defined before.

Table 11.6 shows that the percentage of the under-fives not deprived in each dimension has improved significantly for all indicators. Between 1992 and 2010, water, sanitation, nutrition, and education improved by seven, six, thirteen, and thirteen percentage points respectively, while delivery improved by five percentage points from 55 to 50 per cent, suggesting the share of women delivering at home has decreased. Examination of zones reveals that sanitation, nutrition, and education improved everywhere, though by varying extents, while there was substantial heterogeneity in the performance of the delivery indicators ranging from significant improvements to a few deteriorations.

The story over this eighteen-year period in Tanzania is one of overall improvements in most key non-monetary indicators, with the exception of water in urban areas. A more detailed analysis of these non-monetary indicators, including considering multiple deprivations, is undertaken by Arndt et al. ( 2014 ).

11.6 Conclusions

While the process has been long, Tanzania has registered more impressive economic progress over the past fifteen years than in the 1980s and 1990s. Economic growth has favoured urban zones, especially Dar es Salaam, with rural areas in general and the agricultural sector in particular lagging behind. Consequently, monetary poverty remains high in rural areas, where the large majority of poor people reside; and progress in poverty reduction has been slow outside of Dar es Salaam. In addition to the pattern of growth, the impact of the world food and fuel price shocks may also have been an important factor over the period considered here.

Except for Dar, survey-based estimates of growth in real household consumption have fallen far below the reported economic growth rates, and what poverty reduction there has been has mostly taken place in the capital too. The question is not why poverty reduction is slow given the fast overall growth rate; it is rather why household consumption has grown so slowly.

The patterns of change in monetary poverty presented in this chapter remain subject to uncertainty, both in relation to the comparability of the consumption data between the latest two rounds and in relation to the price adjustment which it has been possible to make. The best assessment we are able to make with the existing data shows slow poverty reduction from 1992/3 to 2007, which seems to have increased a little in more recent years, including in rural areas. The rate of decline remains slow; and the slightly more rapid poverty reduction experienced recently still needs to be verified and adequately explained, particularly the observation that poorer households appear to have experienced better relative consumption growth than less poor households. In addition, it is too early to judge how sustainable the recently observed (still modest) rural poverty reduction may be, unless policy focus is put squarely on rural sector advance. A much stronger focus on agriculture must play a key role in accelerating rural poverty reduction.

Tanzania’s historical record in relation to non-monetary poverty is one of progress, one positive legacy of the Nyerere era. These indicators also confirm a pattern of general improvement between 1992 and 2010 for households as a whole and in relation to young children, though not all indicators improve. These changes are less directly related to growth and more to public service provision. We do note as well that these improvements remain relatively slow. Tanzania’s record on non-monetary indicators is not particularly impressive compared with neighbouring countries, and is disappointing in some regions of the country. In other words, it would appear that the extent and efficiency of public service provision still needs to improve significantly.

On a parallel note, we wish to conclude by stressing that the present state of lack of clarity and consistency as regards basic data should be a matter of concern to both policymakers and those who wish a sound evidence base for supporting future progress.

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See World Bank ( 2015 ) for the latest World Bank report.

Sub-Saharan Africa also exhibits a high variance in this ratio. Globally, the ratio of household-based to national-accounts-based estimates is typically less than one.

The CPI records price inflation of 75 per cent during this period—that is, somewhere between the national accounts consumption deflator and the HBS data.

Differences in sampling and survey methodology remain.

The fact that the growth rate is higher in the national GIC than in any of the others is explained by significant population shifts over the period, with the population in the (poorer on average) rural areas falling from 80.4 per cent in 2000/1 to 74.8 per cent in 2007.

It is important first to note that in absolute terms the gains we measure among the poorer groups are not particularly large. For the poorest five deciles, increases in consumption amount to only around 4,000 TSh (in 2011/12 prices) per month, and appear significant in relative terms only because of the low levels of consumption that characterize the bottom half of the consumption distribution in Tanzania.

What is less clear is whether poorer households would also have faced higher food price inflation as well; this would need to be the case to conclude that the food consumption GICs were also misrepresenting the pattern of change.

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Research Article

Is Tanzania’s economic growth leaving the poor behind? A nonlinear autoregressive distributed lag assessment

Roles Conceptualization, Data curation, Formal analysis, Investigation, Methodology, Resources, Software, Validation, Visualization, Writing – original draft, Writing – review & editing

* E-mail: [email protected]

Affiliation School of Business, University of Southern Queensland, Toowoomba, QLD, Australia

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Roles Formal analysis, Investigation, Supervision, Validation, Writing – review & editing

Roles Formal analysis, Supervision, Validation, Writing – review & editing

  • Valensi Corbinian Kyara, 
  • Mohammad Mafizur Rahman, 
  • Rasheda Khanam

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  • Published: July 8, 2022
  • https://doi.org/10.1371/journal.pone.0270036
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Fig 1

Most developing economies have recently experienced significant economic growth without corresponding substantial poverty reduction and improved population wellbeing. This paper uses a nonlinear autoregressive distributed lag model to explore the growth-poverty relationship in Tanzania using annual time series data on per capita consumption expenditure, real GDP, GINI index, and unemployment from 1991–2020. To explore the causality among the variables and long-run asymmetry between per capita consumption expenditure and economic growth, the study employs Granger causality and Wild test respectively. The results confirm the presence of long and short-run asymmetric behavior of economic growth. Besides, in the short-run, the Granger causality test supported the feedback hypothesis between economic growth and consumption expenditure, and the unidirectional hypothesis from income inequality and unemployment to consumption expenditure. In the long-run, unidirectional causality was observed from consumption expenditure to both economic growth and unemployment. The study submits that while economic growth exhibits poverty reduction features, growth alone is not sufficient to alleviate poverty because the interaction of income inequality with economic growth dampens the poverty-reducing effects of economic growth. Therefore, economic growth has a significant explanation for poverty but not all about the evolution of poverty. The study opens policy perspectives with wide international relevancy as outlined in the policy implication section.

Citation: Kyara VC, Rahman MM, Khanam R (2022) Is Tanzania’s economic growth leaving the poor behind? A nonlinear autoregressive distributed lag assessment. PLoS ONE 17(7): e0270036. https://doi.org/10.1371/journal.pone.0270036

Editor: Régis Y. Chenavaz, Kedge Business School, FRANCE

Received: October 18, 2021; Accepted: June 2, 2022; Published: July 8, 2022

Copyright: © 2022 Kyara et al. This is an open access article distributed under the terms of the Creative Commons Attribution License , which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited.

Data Availability: [1] Data on per capita consumption expenditure, the GDP growth rate, labor force and unemployment rate are available from the World Development Indicators database of the world banks; https://data.worldbank.org/ [2] Data on GINI index is available through (Lahoti et al., 2016): https://ssrn.com/abstract=2480636 .

Funding: The authors received no specific funding for this work.

Competing interests: The authors have declared that no competing interests exist.

1.0 Introduction

Increasing economic growth has received extensive discourse in research and government following its perceived inherent potential to alleviate poverty and improve populations’ wellbeing. An increase in economic growth is normally considered good news, especially for the country’s poor, while vice versa is true. Nevertheless, in recent years, it has been observed that economic growth, especially in developing countries does not elicit a corresponding poverty reduction [ 1 – 3 ]. Such a mismatch between growth and poverty is generally referred to as a growth-poverty dilemma.

This research queries the dilemma of growth-poverty mismatch in developing nations by investigating and presenting empirical evidence as a contribution to narrowing the gap in growth-poverty literature. The study is unique because it brings a new perspective that extends and enriches previous growth-poverty empirical studies by investigating whether economic growth is sufficient for alleviating consumption deprivation poverty and delivering improved quality of population’s wellbeing in developing economies. Most of the previous studies [ 4 – 6 ] dwelt on the question of whether economic growth ameliorates the incidence of poverty. Furthermore, most of the previous studies used cross-sectional data and linear autoregressive methods to assess the growth-poverty nexus; very few studies have employed time-series data. Therefore, the current study employs time series data and a nonlinear autoregressive distributed lag approach to add a new methodological perspective to the literature. The findings of the study affirm that while economic growth carries feasible kernels for poverty alleviation, growth alone is not sufficient for poverty alleviation and improved population wellbeing. Factors such as income inequality and unemployment tend to dampen the poverty-alleviating impact of economic growth, thereby aggravating the population’s quality of life.

While the scenario of growth-poverty mismatch is not limited to developing economies, its manifestations are more pronounced in developing countries. It is from this background, therefore, that the authors are motivated to investigate empirical evidence on the growth-poverty dilemma, using Tanzania as a case in point and focusing on consumption deprivation poverty; an area that is still under-researched.

Economies of most developing nations, such as Tanzania, contain inherent characteristics such as lack of access to meaningful employment, social and income inequalities, low capital formation, the rapid increase of population, high levels of inflation, the vicious circle of poverty, struggle over the rights and market of resources, and severe vulnerability to climate change. Such characteristics pose a serious stumbling block on the path toward the realization of the United Nations’ Sustainable Development Goals 2030. For instance, poverty alleviation is one of the key development challenges facing Tanzania since its political independence in 1961. The history of the country’s development strategies gives evidence of many, and rich policies formulated to spearhead growth for poverty reduction. Consequently, the Tanzanian economy has enjoyed an upward growth trajectory, especially over the last three decades, after the 1990s economic reforms which came at a near economic collapse in the 1980s. For instance, GDP improved from US$ 5.25 billion in 1995 to US$ 18.39 billion in 2005 and then up to US$ 61.14 billion in 2019 [ 7 ]. During the period 2009–2019, the economy has been growing at an average rate of 6.2% annually; where the highest growth was 7.67% in 2011and the lowest rate of 4.5% was registered in 2012 [ 7 ].

Despite the high and consistent economic growth in Tanzania, the fruits of increased economic growth have not reached rural and peri-urban areas where the majority of the real poor are hosted [ 2 , 8 – 10 ]. For instance, the rapid growth has not succeeded in generating decent and adequate jobs; the average annual unemployment rate during 2010–2020 is 2.45% [ 7 ]. Rural poverty in Tanzania is much more pronounced, as compared with its urban counterpart. Most of the poor are in the rural areas where poverty-combating facilities such as access to quality medical care, basic education, reliable transportation, and clean water are noticeably missing in most rural settings. The ill-developed infrastructures especially in rural areas further complicate the poverty scenario in Tanzania and are not able to support the needed economic transformation. As a result, economic growth in Tanzania has marginally combated poverty among rural and agrarian households. Thus, the Tanzanian economy presents a unique situation because it has achieved high strides in terms of growth over the last three decades, but such rapid growth has not elicited a commensurate level of poverty reduction and improved wellbeing [ 1 ]. This scenario, therefore, calls for a systematic investigation into the nature and relationship between growth and wellbeing in Tanzania. Hence, the current study queries the uniqueness of the prevailing poverty-growth dilemma in Tanzania from the perspective of the population’s wellbeing.

It is widely considered that increasing economic growth comes with poverty alleviating effects [ 4 , 5 , 11 ]. Thus, a high real GDP is theoretically associated with a reduced incidence of poverty and an improvement in quality of life. Nevertheless, conditions such as unemployment and income inequality dampen the poverty-reducing impact of economic growth [ 4 , 11 ]. As a result, the rising mean income is not benefiting everybody [ 12 ]. Moreover, poverty is most manifested in developing economies, and it is affirmed that managing income inequality is one of the important approaches to combating poverty.

This study has two primary objectives. First, to investigate empirical evidence and the importance of economic growth for alleviation of consumption deprivation poverty and improved population wellbeing in Tanzania. Second, to investigate the nature and impact of the interaction of economic growth with income inequality on the quality of the population’s wellbeing. While such investigations could take a comparative approach, e.g., a cluster of East African or sub-Saharan countries, scrutinizing the impact of growth on consumption deprivation in Tanzania is germane due to the country’s unique political and economic history. Unlike other sub-Saharan African economies, the Tanzanian economy is shaped by unique macroeconomic and political reforms that shape the current alignment, nature, and magnitude of doing business in Tanzania. These include the Ujamaa development policy—communal self-reliance policy, Kiswahili language which unified all the ethnic groups in the country, the existence of reasonable democratic rule of law and smooth transition of power, etc.

To probe the discourse, a time series data on the rate of growth of real economic growth, GINI index, and unemployment for the period 1991–2020 are analyzed using a nonlinear autoregressive distributed lag approach and Wald test to explore symmetry among the variables. The choice of the period i.e., 1991–2020 is based on first, the economic progress registered by the Tanzanian economy following the 1990s economic reforms. Second, the period is determined by the availability of reliable data for the chosen variables.

The current study makes a distinctive contribution to the growth-poverty literature because it is one of only a handful of studies that explore empirically the relationship between growth and consumption expenditure in the presence of income inequality and unemployment in developing countries. Besides, to the best understanding of the authors, the study pioneers such investigation for the first time using Tanzanian data and methodologically it is the first of its kind in sub-Saharan Africa where consumption deprivation and poverty are rife. While the empirical assessment is based on Tanzanian data, the findings are of great significance for developing economies because the knowledge of the growth-poverty nexus and the impact of economic growth interaction with income inequality and unemployment can assist planners in conducting policy instruments to enhance household consumption expenditure and improve overall population’s wellbeing.

To attain the objective of the study, the remaining part of this study is organized as follows. After a brief literature review in section two, section three presents the study methodology, followed by a presentation of empirical estimation findings and discussions in section four. Section five outlines key policy implications based on the findings and concluding remarks.

2.0 Brief literature review

The 2030 Sustainable Development Goals 1 and 10 seek to alleviate all forms of poverty and make significant strides in reducing inequality [ 13 ]. Various approaches are being taken to realize poverty reduction and improved livelihood. The growth-poverty-inequality literature suggests some aspects that researchers and practitioners must pay attention to when assessing and addressing poverty and poverty-related issues. Considering the scope of this study and without trying to be exhaustive, we draw our attention to three of such aspects: inequality aggravates poverty, economic growth alleviates poverty, and growth-inequality-poverty exhibits inseparable triangular relationships.

First, most studies have observed that inequality aggravates poverty because it reduces the level of disposable income, thereby limiting individuals’ purchasing power, and ultimately leading to consumption deprivation. Proponents of this school attest that inequality and poverty are closely netted together in such a way that strategies to end income inequality will also lead to poverty reduction [ 11 , 14 – 17 ]. For instance, some researchers [ 17 ] assessed the impact of financial development, income inequality, and economic growth on poverty in India using time series data for the period 1970–2015. The linear autoregressive distributed lag model bound testing procedure delivered evidence that while economic growth and financial development help to alleviate poverty, income inequality and inflation aggravated poverty significantly. Therefore, different countries may experience rapid economic progress over a prolonged period but the rate at which such growth translates into poverty reduction and improved livelihood is among other factors dependent on the parallel efforts in place to curb income inequality [ 4 , 17 , 18 ].

Second, there is a cluster of studies propagating higher levels of economic growth as a tool for poverty alleviation: Sustained economic progress approach, commonly rerefer to as the trickle-down economics approach, is frequently cited in the literature as among the traditional approaches to address poverty [ 5 , 17 , 19 – 22 ]. However, the results from these studies exhibit variation across regions, countries, and even disparity across various parts of the same country–e.g., rural vs. urban. This suggests that different regions have different underlying conditions in such a way that the same rate of economic growth produces a varied impact on poverty and people’s wellbeing. For instance, to this end, some scholars [ 8 , 10 , 23 , 24 ] attest that in the recent years most of the sub-Sahara African countries have experienced wealth without prosperity; the rapid economic progress is not accompanied with household poverty reduction and improved quality of life.

Third, some studies attest that income inequality, growth, and poverty exhibit inseparable triangular relationship, i.e., subject to poverty income inequality and growth can be either positive or negative depending on the empirical approach employed, while subject to income inequality, poverty and economic growth are negatively correlated irrespective of the method employed [ 22 , 25 ]. In this case, policies to address e.g., poverty must consider the inbuilt connection between poverty, inequality, and growth [ 4 , 26 , 27 ]. Therefore, these findings confirm that poverty is a multi-pronged approach issue, and its alleviation calls for a multi-dimensional strategy. A single approach to poverty alleviation will fail to yield the desired results.

The current study contributes to the debate on the growth-poverty-inequality debate by presenting an empirical assessment of economic growth, income inequality, and consumption deprivation in Tanzania. While empirical studies on consumption deprivation poverty are still limited in sub-Saharan Africa, to the best of the authors’ understanding, this is the first study of its kind focusing on Tanzania and using the NARDL approach for analysis.

3.0 Methodology

Taking into consideration the goal of this study, a linear model is not an ideal model because of the possibility that our data may comprise some inherent nonlinearities. It has been affirmed that nonlinear autoregressive models provide a better fit for volatility as compared to the traditional linear autoregressive models which tend to impose unrealistic restrictions, culminating in biased inferences [ 28 – 30 ].

Therefore, the nonlinear autoregressive distributed lag (NARDL) mode is the most suited for our analysis because, first it allows for testing the responses of the explained variable to changes in each of the explanatory variables, and so makes it possible to build asymmetry line [ 31 ]. Second, NARDL lends a hand in differentiating the long-run and short-run effects of changes in independent variables in the dependent variable. In this case, the model allows for ascertaining key features in the immediate reaction of the dependent variable following the shocks in the independent variable [ 31 , 32 ]. Third, NARDL is prominent for its ability to handle both linear and nonlinear cointegration as well as accommodate multiple data series with different orders of integration [ 33 ].

3.1 Data and variables

This study employs annual time series data on per capita consumption expenditure (CE) as a proxy for consumption deprivation poverty, GDP growth rate (EG) as a proxy for economic growth, GIN index growth rate (IQ) as a proxy for income inequality, and total unemployment rate (UE)—a % of the labor force—to depict the proportion of total labor force willing and able to work but without work, all for the period 1991–2019.

  • Per capita consumption expenditure. The CE is employed here as a proxy for measuring consumption deprivation poverty. It is the best proxy for consumption deprivation poverty, and so measures of population’s wellbeing, because consumption expenditure among the poor is more reliably reported and more stable as compared to income [ 17 , 34 , 35 ]. Besides, CE as a measure of consumption deprivation poverty is analogous to the World Bank’s standard description of poverty as the inability to attain a minimum acceptable standard of living as quantified in terms of basic consumption needs [ 36 ]. Further, due to the inaccessibility to poverty headcount data for many countries, consumption expenditure has been widely used to measure consumption deprivation poverty as an alternative approach to cast insight on the overall scenario of poverty [ 4 , 35 , 37 – 39 ].
  • GDP growth rate. GDP growth rate is widely used in the literature as a standard proxy for economic growth [ 40 – 43 ]. GDP is frequently considered an effective indicator of economic growth because it gives quantifiable information about the size and the performance of the economy. Thus, the real GDP growth rate gauges the health of the economy because an increase in real GDP is an indication that overall the economy is performing well. If the real GDP is falling, that is an indication of economic stagnation and or decline and the nation is not making economic progress. An increase in real GDP is expected to have a positive impact on per capita final consumption expenditure, and thus compact consumption deprivation.
  • GINI index. GIN index, a well-celebrated measure of income inequality, is a statistical measure of income or wealth distribution among individuals relative to the entire country’s population [ 4 , 44 – 46 ]. It is also referred to as the GINI index and it ranges from 0 (0%) to 1 (1%) such that 0 represent perfect equality and 1 perfect inequality. It is noted here that while the GINI index shows the income distribution among the population in a country, it, however, does not show its overall income [ 47 ]. Thus, a low-income and high-income country can exhibit the same GINI index for the index is only an indication of wealth distribution, not income level.
  • Unemployment. Unemployment, measured as % of the labor force in a country willing and able to work but without work, indicates the extent to which the active population is inhibited from obtaining the reliable capability to access necessary income for improved livelihood [ 4 , 48 ]. The description of each variable and data source is summarized in Table 1 . Fig 1 : The rate of growth of GDP, unemployment, GINI index, and consumption expenditure , is a graphical representation showing the trend of the variables. The horizontal straight line at the middle of the figure represents time in years. The blue trend line represents the consumption expenditure, which is the dependent variable. The other 3 trend lines depict independent variables, i.e., the dark-yellow line depict economic growth (EG) trend, the grey line depicts income inequality (IQ) trend, and the light-yellow line depicts unemployment (UE) trend. Overall, all independent variables exhibit upward trend, and they seem to be associated with the variation in the dependent variable.

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3.2 Empirical model specification

The study applies a nonlinear autoregressive distributed lag (NARDL) model to assess the relationship between consumption expenditure, GDP growth, income inequality, and unemployment in Tanzania during 1991–2020. In addition to the advantages of using the NARDL model outlined in section 3.0 above, we also observe that some previous studies have used the NARDL approach to assess asymmetry in financial markets [ 50 ], energy policy [ 51 ], uncertainty impacts [ 52 ], commodity pricing [ 53 , 54 ], etc. Nevertheless, to our best knowledge, our study is the first one to apply the NARDL model for exploring the relationship between economic growth and consumption expenditure, to measure consumption deprivation poverty.

causes of poverty in tanzania essay

Where CE is the per capita consumption expenditure growth rate, measuring consumption deprivation poverty; EG is GDP (economic) growth rate, IQ is the growth rate of income inequality, UE is an annual growth rate of unemployment, and β i is a vector of long-run coefficients to be estimated.

causes of poverty in tanzania essay

Where θ i is a vector for long-run coefficients. It is here expected that θ 1 > 0 and θ 1 > θ 2 because an increase in economic growth will have a higher effect on consumption expenditure than a decline in economic growth. To account for the asymmetry impacts of income growth on consumption expenditure, we have included EG t + and EG t - in Eq 2 to represent the positive changes and negative changes in economic growth respectively. In this case, EG t + and EG t - depict the partial sum of the changes in EG t such that.

causes of poverty in tanzania essay

From Eq 3 , the long-run relationship between positive shocks in economic growth and consumption expenditure is depicted by θ 1 , while θ 2 shows the long-run relationship between the negative shocks in economic growth and consumption expenditure. Besides, we anticipate that θ 1 > θ 2.

causes of poverty in tanzania essay

3.3 Estimation process

To estimate the NARDL model as depicted by Eq 3 , we first employed the Augmented Dickey-Fuller unit root test to determine the order of cointegration of the variables. While ARDL is appropriate for variables with different orders of integration i.e., I(0) and I(1), it is limited when it comes to the I(2) series. Thus, testing for unit root is necessary to avoid estimating spurious regression. Second, to correctly estimate Eq 3 , we determined the lag length with the help of the Akaike Information Criterion (AIC). Third, we employed the bound testing cointegration method [ 57 ] to test for the existence of long-run nexus among the variables for both linear and nonlinear specification of Eqs 1 and 2 respectively, and Shin’s approach [ 58 ] in unrestricted error correction model i.e., Eq 3 . Fourth, we derived the cumulative dynamic multiplier of 1% positive and negative changes in economic growth, to estimate the long-run asymmetric impact of changes in economic growth on consumption expenditure. Finally, we apply the Granger causality approach [ 59 ] to examine the causal nexus among the variables.

4.0 Findings and discussions

4.1 unit root test.

To determine whether the series is stationary or not, this study employed the augmented Dickey-Fuller test, i.e., the ADF test [ 60 ], and compared the results with the Phillips and Perron test, i.e., PP test [ 61 ]. The stationarity test is an important step in regression analysis to avoid generating spurious regression results. The ADF test findings shown in Table 2 confirm that CE, IQ, and UE are stationary at level. However, EG contains unit root at level, but it is stationary at first difference. Thus, the series CE, IQ, and UE are integrated of order 0, i.e., I(0), while the series EG is integrated of order 1, i.e., I(1). To substantiate the ADF test results, we carried out the PP stationarity test which is said to be more powerful than the ADF test [ 32 ]. The PP results in Table 2 , are consistent with the ADF test results. These results allow us to apply the NARDL model for no series that is integrated of order I(2).

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4.2 Lag length determination

Time series estimation is sensitive to lag length. Therefore, it is necessary to determine the optimal lag before running a regression. Table 3 shows the results of lag order selection criteria. Following the Akaike information criterion (AIC), when CE is the dependent variable, the optimal lag is two.

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4.3 NARDL long-run form and bounds test

Table 4 shows the estimation of long-run form and bounds test results. We observe that the calculated F-statistic, which is 7.33, is greater than the upper bound limit I(1), at a 1% level i.e., 4.37. This result is evidence that there is cointegration (long-run relationship) among the variables.

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In view of Eq 2 , Table 4 results show that in the short-run the coefficients of D(EG_POS(-1)), D(EG_NEG(-2)), D(IQ(-2)), and D(UE(-1)) are all statistically significant at 5% level, while the rest of the coefficients are not statistically significant. In the long-run, the coefficients of UE(-1) and CE(-1) are both statistically significant at a 5% level. Since some of the variables in the NARDL estimation are not significant, for forecasting and exploring the long-run asymmetric relationship, a parsimonious model based on NARDL findings needs to be estimated. Hence, we estimate a stepwise regression based on Table 4 results.

4.4 Stepwise estimation

The upper part of Table 4 shows a form of parsimonious model which has been depicted by the AIC criteria. Table 5 shows the results of Stepwise Regression when CE is the dependent variable. The parsimonious estimation results show that in the long-run changes in CE are explained by CE(-1) and IQ(-1). In the short-run, changes in CE are significantly accounted for by D(CE(-1)) and D(EG_POS(-1)). Besides, our parsimonious results fulfill the anticipation that θ 1 , θ 2 > 0. The non-significance of EG_POS(-1) and EG_NEG(-1) in the long-run, while IQ(-1) is significant in the long-run is very revealing. This suggests that in the case of Tanzania, unlike the traditional expectation that higher levels of economic growth will deliver increased consumption expenditure and so alleviate consumption deprivation both in the long and short-run, on the contrary, in the long-run increased economic growth alone cannot significantly lower consumption deprivation poverty. Instead, in the long-run, unless income inequality is fundamentally managed, increased economic growth will not lead to poverty alleviation because increased benefits of economic growth will be eroded by growing income inequality as well as unemployment.

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4.5 Wald coefficient diagnostic test

Wald test is necessary to enable us to determine long-run symmetry. The stepwise regression results help us to develop estimation commands as shown in the upper part of Table 6 , which is a representation of stepwise regression results in Table 5 . The estimation command identifies the long-run coeffects of the independent variables i.e., C(3) to C(8). The Wald test for the long-run asymmetry will therefore seek to identify if C(3) = C(4). Table 7 summarizes the Wald test results.

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Table 7 shows Wald test coefficient diagnostic results. The decision criterion is that if we fail to reject the null hypothesis i.e. if the variables are equal, then we conclude that there is long-run asymmetry. Table 7 results affirm that the probability, at a 5% critical value level, could not reject the equality of C(3) and C(4) which means there is long-run symmetry. These results are further enriched by plotting the NARDL multiplier effects curve, i.e., Fig 2 : Multiplier graph for EG(Pos) and EG(Neg) . The continuous black line in the middle of the chat shows how the consumption expenditure (CE) adjusts due to positive shocks in economic growth (EG). The black dotted line (overlapping the black line) shows how CE responds to negative shocks in the EG. The pattern of these two lines gives the impression that the dependent variable responds almost in the same way to the positive and negative shocks in the regressors. The bold dash-dotted red line in the middle of the chat is the asymmetry plot; it depicts the difference between the dynamic movements of positive and negative changes in the regressor. The asymmetry plot lies between the upper and lower bounds (i.e., the small dashed red line) of the 95% confidence interval. Since part of the horizontal zero line lies outside the critical bound region, then the figure affirms the existence of long-run asymmetry.

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4.6 Causality test

Since cointegration exists among the variables, vector error correction (VEC) causality can be estimated. The causality estimation results, as summarized in Table 8 , forms a basis for inferring long-run and short-run causality among the variables: In the short-run, there is bidirectional causality between consumption expenditure and economic growth; unidirectional causality from income inequality to consumption expenditure; and from unemployment to consumption expenditure. In the long-run, there is unidirectional causality from consumption expenditure to economic growth, and from consumption expenditure to unemployment. These results are consistent with the NARDL findings.

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4.7 Diagnostic tests

To assess the robustness of our findings, three key tests were carried out: serial correlation LM test, Heteroskedasticity, and normality test. The results are summarized and presented in Table 9 . Since the p-value corresponding to the Serial correlation LM test is bigger than 0.05, we fail to reject the null hypothesis and conclude that our model is not suffering from residual autocorrelation. Likewise, the F-test of heteroskedasticity test has a significance of 0.942 which is greater than 0.05. Thus, we reject the null hypothesis and affirm that the residuals are homoscedastic. Finally, the p-value for the normality test is greater than 0.05; we fail to reject the null hypothesis. Therefore, the residuals are multivariate normal.

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4.8 Model stability test

To test for model stability, we employed CUSUM and CUSUM Square Test and the results are depicted by Fig 3 : Model stability: CUSUM & CUSUM Square Test . The upper part of the figure represents the CUSUM line chart, and the lower part represents the CUSUM Square line chart. The two charts are based on accumulated residuals and aggregate residual squares, respectively. While the CUSUM detects systematic modifications in regression coefficients, the CUSUM Square test detects drastic changes in the permanence of the regression coefficients. The dotted red lines in both charts represent the upper and lower boundary (i.e., control line) of the CUSUM and CUSUM Square chats. The blue lines in the upper chart and lower chart represent CUSUM and CUSUM Square respectively. Therefore, the figure suggests that the model is stable because both the CUSUM and CUSUM Square line charts lie within the 5% specified critical boundary.

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5.0 Concluding remarks and policy implications

This paper analyzed the impacts of economic growth on per capita consumption expenditure in Tanzania. To capture the long-run and short-run asymmetric relationship between consumption expenditure and economic growth, we adopted the nonlinear autoregressive distributed lag (NARDL) model and Wald test. Further, to explore the causal relationship among the variables, (i.e., per capita consumption expenditure, economic growth, income inequality, and unemployment), we employed the Granger causality test approach. The estimated results confirmed the presence of long-run and short-run asymmetric behavior of economic growth. In the long-run, changes in income inequality are significant and they account for changes in consumption expenditure. In the short-run, an increase in economic growth is associated with increasing consumption expenditure and vice versa. Besides, the causality test confirms a bidirectional causality between consumption expenditure and economic growth in the short-run. Likewise, in the short-run, there is unidirectional causality from income inequality to consumption expenditure, and from unemployment to consumption expenditure. In the long-run, the study generated evidence of unidirectional causality from consumption expenditure to economic growth, and from consumption expenditure to unemployment. The causality results are consistent with the NARDL results.

From a policy viewpoint, this research demonstrates some key conclusions, pointing to the applications of the findings: First, the evidence shows that only income inequality is significant in the long-run, and economic growth in the short-run indicates the systemic effect of inequality in the redistribution of income. It affirms that in the case of Tanzania, increased economic growth is necessary for containing consumption deprivation but in the long-run, the rising income inequality interacts with economic growth and dampens the positive poverty-alleviating impact of economic growth. Thus, policy attention should be directed to containing income inequality if increased benefits of economic growth should count significantly in reducing consumption poverty and improving populations’ wellbeing. Robust economic growth-related policies to spearhead poverty alleviation must be accompanied by strategies to alleviate income inequality. For the real poor to realize the full benefits of economic growth, it is necessary to institute policy instruments to encourage economic progress and at the same time address the appalling structures which give rise to income inequality. Strengthening collective bargaining rights among the low- and middle-income earners, promoting the adoption of living-wage policies, the introduction of stronger minimum wage law, subsidizing the provision of public goods e.g., health care and education, facilitating greater access to higher-income jobs, and promoting workers’ rights to resources ownership are some of the recommended programs to contain income inequality.

Second, the short-run bidirectional causality between consumption expenditure and economic growth indicates that policies to promote economic growth will lead to increased consumption expenditure and vice versa. The short-run unidirectional causality from income inequality and unemployment to consumption expenditure underscores the need for policy instruments to contain both income inequality and unemployment, promote increased consumption expenditure, and improve the population’s wellbeing. High- and persistent-income inequality and unemployment erode individuals’ ability to access necessities of life due to lack of necessary income and so deepens deprivation poverty. For instance, unemployment is associated with limited autonomous consumption, which is a mere subsistence, and it does not provide multiplying effects for improved wellbeing.

Third, the evidence that in the long-run income inequality influence the level of consumption expenditure and in turn consumption expenditure Granger causes the level of economic growth and unemployment implies that policies to contain income inequality in Tanzania will, in the long-run, carb unemployment and promote economic growth and consumption expenditure. In the long-run, income inequality has a significant sapping effect on economic growth. Thus, since income inequality in Tanzania is mostly manifested in the agriculture sector, (as compared to other sectors), and since the sector hosts the majority of the country’s poor, for poverty reduction initiatives to be effective, concerted efforts must be focused on transforming agriculture sector to promote income and employment within the sector. Improved farmers’ access to credit facilities, regular hands-on training on improved farming and animal husbandry, processing of agricultural products in situ for value addition, access to simple technologies to reduce post-harvest losses, and improved access to market and resources ownership are some of the recommended strategies to transform the agriculture sector. Besides, policy instruments promoting investment in the agriculture sector are significant for poverty reduction and improved wellbeing. In the case of Tanzania, promoting economic growth, without a simultaneous implementation of robust policies to tackle income inequality which perpetuates poverty at the grassroots, will not deliver the desired long-run results.

The main limitation of our study is the availability of data, i.e., there are no reliable sources of data, for the variables in question, for the period before 1991. As a result, the research had to use a relatively small sample, i.e., data for the period 1991–2020. To address this problem the authors settled for the NARDL methodology because it is a more reliable method in the presence of small samples.

Finally, for future research examining the growth-poverty dilemma in developing countries, we recommend research in the following areas. First, exploration of other factors which are deemed to contribute to the growth-poverty nexus. These include demographic factors (e.g., the influence of rapidly increasing population and its quality on consumption poverty), methodological challenges (e.g., the limited budget and lack of adequate skills needed for data collection, processing, and management by countries’ bureau of statistics), and stagnation in the agricultural sector. For instance, in Tanzania even though the sector hosts over 74% of the population, it is facing multiple challenges such as limited public expenditure, poor access to private land ownership, lack of access to credit facilities, etc. Second, exclusive investigation of the growth-poverty dilemma from an ethical perspective is under-researched in developing nations. Such an investigation will provide corroborating evidence on the role of ethics in the ongoing efforts to account for the evolution of poverty, thereby addressing the prevailing scenario of growth without prosperity in developing nations. For instance, scholars may consider researching areas such as evaluating commitments of multinational corporations on poverty alleviation, stakeholders’ perceptions about the effectiveness of corporate social responsibility as poverty alleviation and wellbeing improvement strategy, and ethical innovation to poverty reduction. Third, we recommend a sectoral analysis to depict the effects of economic growth by sectors and the sectoral impact on poverty alleviation.

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causes of poverty in tanzania essay

The State of Zanzibar's Children

causes of poverty in tanzania essay

The Journey of a Child in Tanzania

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Understanding Child Poverty in Zanzibar

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Three out of four children in tanzania are affected by poverty.

causes of poverty in tanzania essay

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causes of poverty in tanzania essay

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The Borgen Project

Poverty in Tanzania: Problems and Progress

Poverty in Tanzania

The Tanzanian government works to improve access to water, education and health services. To combat poverty in Tanzania, the government and several organizations have chosen education to emphasize. Since 2016, Tanzania has implemented a fee-free basic education policy which has increased enrollment and decreased the number of out of school children. Two parts of the policy include:

  • A commitment to providing 12 years of free and mandatory basic education to the whole population.
  • A mandate to expand technical and vocational education and training. Thus, increasing the number of skilled human resources and becoming a semi-industrialized middle-income country by 2025.

Additionally, the World Bank established the Secondary Education Quality Improvement Project (SEQUIP). SEQUIP aims to provide children in Tanzania safer and more accessible secondary education, thus improving the country’s human capital. The project also strives to increase opportunities for girls and reduce teen pregnancy and marriage.

The Tanzanian government and World Bank understand that by improving education and creating opportunities for girls, they contribute to economic growth.

Health Care

Aside from major economic growth in the past decade, not everyone in Tanzania has benefited. Poverty in Tanzania persists, with nearly much of the population living below the income poverty line of $1.90 per day. The Abbott Fund has contributed to developing sustainable improvements in the quality of testing, treatment and health care across Tanzania. The Abbott Fund is responsible for improving infrastructure and technology at healthcare facilities. The organization also seeks to address critical issues surrounding HIV/AIDS, such as providing aid to orphans and vulnerable children. Additionally, the Abbott Fund has contributed to the following areas of need:

  • Provided nutrition and income to the residents of Mkinga by donating 300 dairy cows, and started farming and poultry co-ops throughout Tanzania.
  • Trained more than 5,000 paralegal volunteers to resolve more than 80,000 paralegal cases surrounding the protection of women and children’s rights.
  • Enrolled more than 1,000 families in community health insurance.
  • Built schools for vulnerable children and allocated millions in grant funding to execute community-development activities.

Poverty in Tanzania perseveres, and economic growth has not been evenly distributed. Real transformation needs to occur on a government level to ensure everyone gains from the continued growth. According to Nadia Belhaj Hassine Belghith, Senior Economist and co-author of the 2019 Tanzania Mainland Poverty Assessment, “along with the reduction in poverty, the country is showing signs of a structural transformation.” Lastly, Tanzania should invest in human capital and skills development while increasing job opportunities for key sectors that promote advancement. By investing in people, Tanzania can reach economic growth that provides for everyone, and not just the ones in power.

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This blog is all about rural community developement in Tanzania and developing countries in general. It is a forum for sharing and discussing various issues related to rural development. Be free to share your views for this purpose. Welcome.

Sunday, February 15, 2009

  • POVERTY IN TANZANIA

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causes of poverty in tanzania essay

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i want to share my testimony of how i become rich and famous today… i was deeply strangled up by poverty and i had no body to help me, and also i search for help from different corners but to no avail… i see people around me getting rich but to me i was so ashamed of my self so i met a man on my way he was very rich and he was a doctor so he told me something and i think over it though out the day so the next day i looked up and i keep repeating what he said to me. ” if you want to get rich quick and be famous” you need to cross your heart and do what is in your mind so i tried all i could in other for me to do as he said so later on i told my fellow friend about this same thing then my friend was interested in my suggestions so i decided to look in the internet and i found their number so we decided to contact them and unfortunately we did as they instruct us to do and later they told us to get some requirements and all the rest… so this initiation took us just a week and later on the great fraternity gave us $1,200,000 to start up our lives…. and now am testifying that if in any case you want to join any great fraternity all you need to do is for you to contact them because they are legitimate and they do as what they instructed them to do, so you can as well WhatsApp me +2348106618681 or you can Email: [email protected]...

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??The Illuminati is not a church, religion, political group, or charity organization, but an elite collective of global influencers who work to further the interests of the human species as a whole. Our decisions are independent of all human divisions, including religious and political differences. We operate solely for the benefit of the human species we have been entrusted to protect, and therefore make no demands of our citizens regarding personal worship,morality, or belief.you wanna be a famous artist or an actor (etc) and you want to be rich,powerful and be famous in the world and also get the sum of 300,000,000US Dollars with a free home of your choice to live in the world and also be getting 700,000,000 US Dollars as monthly salary and also start gaining money to start up a business of your own choice contact us the illluminati organization with the below info ([email protected]) whats-app no: +2347016808047 (HOTLINE)Greatness is not about who you are but who you believe you can become.Have courage to pursue your own path. The sheep are safe in their cages but the lions run free in the wilderness. The greatest among us are most different from the rest. ??EL LEL BALEIL XION ,,,,,..

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Blog Archive

  • ►  February (3)
  • CONFLICT RESOLUTION
  • CONFLICT THEORIES
  • COMMUNITY INVOLVEMENT
  • HOUSING AND SECURITY OF TENURE IN TANZANIA
  • HOUSING AND LAND USE IN TANZANIA
  • CAUSES OF CONFLICTS IN AFRICA
  • ENVIRONMENTAL DEGRADATION
  • CIVIL SOCIETY IN TANZANIA
  • UNDERUTILIZATION OF FOREST IN TANZANIA

IMAGES

  1. 5 Facts About the Causes of Poverty in Tanzania

    causes of poverty in tanzania essay

  2. Poverty: Effects and Causes Free Essay Example

    causes of poverty in tanzania essay

  3. The Poverty Reduction Strategy of Tanzania

    causes of poverty in tanzania essay

  4. The 7 Most Common Causes of Poverty

    causes of poverty in tanzania essay

  5. 10 CAUSES OF POVERTY IN TANZANIA

    causes of poverty in tanzania essay

  6. Cause and Effect Essay Examples on Poverty

    causes of poverty in tanzania essay

VIDEO

  1. KENYA SHOWS TANZANIA WHO'S BOSS AS TENSIONS ESCALATE

  2. What causes poverty? #poverty #entrepreneur #homeless #abuse #nextgen #brand

  3. Period Poverty Issue in Tanzania (Lecturer: Benica)

  4. Heavy rainfall causes landslide in northern Tanzania

  5. poverty in somalia pictures

  6. Malnutrition in Tanzania

COMMENTS

  1. Tanzania's Path to Poverty Reduction and Pro-Poor Growth

    The 2019 Tanzania Mainland Poverty Assessment notes that poverty decreased by eight percentage points in 10 years, down from 34.4% in 2007 to 26.4% in 2018. Country poverty assessments provide information on the causes and impact of poverty in a country, and examine how public policies, expenditures and institutions affect poor citizens.

  2. 10 Causes of Poverty in Tanzania

    In Tanzania, some of the main causes of poverty include lack of access to education and healthcare, limited economic opportunities, high levels of inequality, natural disasters, and political instability. Other factors that contribute to poverty in Tanzania include poor infrastructure, corruption, and limited access to credit and financial ...

  3. 5 Facts About the Causes of Poverty in Tanzania

    This article will discuss five facts about the causes of poverty in Tanzania. 5 Causes of Poverty in Tanzania. The population rate is increasing faster than the poverty reduction rate in Tanzania. This is causing millions of people to live in poverty and survive off of $1.90 a day or less. According to the World Bank's Poverty and Equity ...

  4. Poverty in Tanzania: significant movement but no net gain

    According to these new estimates, more than 12% of Tanzania's population were poor in both 2012 and 2018 (persistent poverty) - meanwhile a much larger share of households (30%) were poor in either period. This second figure illustrates significant movement into and out of poverty at the household level; in just six years, the 'poor' or ...

  5. Perpetuation of Poverty in Rural Tanzania

    The international poverty line established by The World Bank is set at earning US $1.90 (or about 1,783 Tanzania shillings 27) per day. 28 Those living under this amount are considered to be in extreme poverty. 29 Under this definition, Tanzania has a poverty rate of 49.1%, 30 and approximately 70% of Tanzanians live below $2.00 per day. 31 ...

  6. PDF Poverty and Household/Family Size in Tanzania: Multiple ...

    RESEARCH ON POVERTY ALLEVIATION Research Report No. 00.4 RESEARCH ON POVERTY ALLEVIATION (REPOA) The Research on poverty Alleviation (REPOA) is a not-for- profit Non-Governmental Organisation registered in Tanzania in November, 1994. Its overall objective is to deepen the understanding of causes, extent, nature, rate of change and means of

  7. Understanding poverty dynamics and vulnerability in Tanzania: 2012-2018

    We study poverty dynamics and vulnerability in Tanzania between 2012 and 2018 using synthetic panel methods. Under the surface of apparent stability in aggregate poverty rates, and despite robust economic growth, households experienced strong fluctuations in consumption levels during this period: 12.5% of the population remained in persistent poverty, a further 30% experienced transient ...

  8. Tanzania Mainland Poverty Assessment

    Tanzania Mainland Poverty Assessment. This report summarizes a comprehensive analysis of poverty and inequality in Tanzania and identifies some priority actions if poverty is to be reduced. The first part is based on the results of the Household Budget Surveys (HBSs) for 2007, 2012, and 2018; several rounds of National Panel Surveys (NPSs); and ...

  9. (PDF) Poverty and development in Tanzania

    This report provides statistical information about young children and their families living in poverty. It includes the following data: (1) from 1987 to 1992, the number of poor children under age ...

  10. 11 Growth and Poverty Reduction in Tanzania

    The responsiveness of poverty to growth is discussed in detail in section 11.3. This discussion highlights major differences between the national-accounts-based measures of growth and the growth in average household consumption from the household surveys. How responsive poverty is to growth depends critically on how growth is measured.

  11. Open Knowledge Repository

    Abstract. This report summarizes a comprehensive analysis of poverty and inequality in Tanzania and identifies some priority actions if poverty is to be reduced. The first part is based on the results of the Household Budget Surveys (HBSs) for 2007, 2012, and 2018; several rounds of National Panel Surveys (NPSs); and Demographic Health Survey ...

  12. PDF Child Poverty in Tanzania V1

    context when Tanzania is preparing for the reporting of Sustainable Development Goals in the 2019 Voluntary National Review (VNR) and the development of a multidimensional poverty measurement specifi c to Tanzania. Child poverty has long been conceptualized as a multidimensional phenomenon. There are several reasons for this.

  13. (PDF) Poverty Reduction Strategies for Tanzania

    Abstract. This paper gives an overview of poverty reduction efforts in Tanzania over last two decades. It draws some light on what ought to be done in the fight against poverty at a time that ...

  14. Is Tanzania's economic growth leaving the poor behind? A ...

    Most developing economies have recently experienced significant economic growth without corresponding substantial poverty reduction and improved population wellbeing. This paper uses a nonlinear autoregressive distributed lag model to explore the growth-poverty relationship in Tanzania using annual time series data on per capita consumption expenditure, real GDP, GINI index, and unemployment ...

  15. Poverty

    The United Republic of Tanzania is a very youthful nation, with half of its entire population composed of children and adolescents. Mainland Tanzania and Zanzibar have ambitious development agendas, and also face entrenched and structural socio-economic challenges, including extensive intergenerational poverty and limited educational and…

  16. PDF Poverty alleviation policies in Tanzania progress and challenges

    Poverty levels in Tanzania have been decreasing, although they still remain high (Office of the Chief Government Statistician, 2012; National Bureau of Statistics, 2014). Poverty levels vary

  17. PDF Poverty, policies and perceptions in Tanzania

    occurred: insufficient orientation towards the real causes of poverty as seen by the popu-lation, and frequent changes in the focus of the aid. Those changes were due in particular ... 5.1 Poverty in Tanzania 33 5.2 Poverty and government policy 1961-2002 38 5.3 Summary and conclusions 42 6 Dutch aid and poverty alleviation in Tanzania 45

  18. Poverty in Tanzania: Problems and Progress

    Poverty in Tanzania is severe — 36% of the population lives below the poverty level. However, in recent years, Tanzania has improved its economy. According to the World Bank's poverty analysis, Tanzania has maintained economic growth and a decline in its poverty rate. Additionally, new opportunities could potentially be positive for changes ...

  19. Growth, Employment, Poverty and Inequality in Tanzania

    Less clear is why Tanzania had more poverty than the countries in the rest of the region, ... Causes of pove rty, Journal of social development in Africa, vol. 25, n. 1, pp. 105-

  20. PDF Poverty, Environment and Livelihood Along the Gradients of The ...

    The Research on poverty Alleviation (REPOA) is a not-for- profit Non-Governmental Organisation registered in Tanzania in November, 1994. Its overall objective is to deepen the understanding of causes, extent, nature, rate of change and means of combating poverty in Tanzania. The specific objectives focus on development of local

  21. Rural Development: POVERTY IN TANZANIA

    Poverty is ability to attain a minimum standard of living Elements of poverty is such as poor infrastructure, un/employment, hunger. lack of balance diet. Diseases, life expectancy. Dependant economy, poor social services (water, schools an hospital) and poor health (disturbed by different diseases). Causes of poverty.