Increasing access to alternative energy sources in developing countries might be a potential for multiple energy consumption rather than switching from traditional to modern ones. This study aims to examine the complementarity and substitutability of cooking fuels and factors influencing households’ choices of such fuels in developing countries. Two categories of cooking energy were considered: traditional (dirty) fuels - firewood, charcoal and kerosene; and modern (cleaner) fuels - Liquefied Petroleum Gas (LPG) and electricity. Based on a nationally representative sample of 5,199 households from the Tanzania National Panel Survey (NPS) of 2020/21, results from a Multivariate Probit model indicate that there is strong substitutability between traditional and modern fuels. Moreover, substitutability exists between solid fuels i.e., firewood and charcoal, while cleaner sources complement each other. Households’ cooking energy decisions were observed to be influenced by demographic and socioeconomic factors such as age, education, dependency ratio, wealth status, house ownership and dwelling location. In light of these findings, the study recommends appropriate policy packages for fastening energy transition in developing countries.
This research paper delves into the impact of national debt on inflation in Tanzania. It uses the autoregressive distributed lag model and the Granger causality approach, with quarterly data from 2003 to 2023. The findings show that total debt stock and public external debt have a negative effect on inflation in the long run. Meanwhile, long-term inflation is positively influenced by both private and public external debt. The study also reveals that national debt has a one-way causal relationship with inflation in Tanzania. These results suggest that the government should focus on managing public debt when making decisions to control inflationary pressure. However, if the government needs to fund a budget deficit, it should prefer external debt over domestic debt since it helps achieve the macroeconomic goal with a reduced risk of inflation.
This paper analyses the drivers of manufacturing exports in Tanzania to demonstrate the applicability of the Heckscher–Ohlin theorem through new trade theories in the manufacturing sector. The study hypothesises that: the labour force positively determines manufacturing exports; GDP has a positive impact on manufacturing exports; and manufacturing production has a positive impact on manufacturing exports. The paper employed the Autoregressive Distributed Lags (ARDL) approach. Lagged manufacturing exports, labour force and trade liberalisation were found to be significant drivers of manufacturing exports. The findings support the H-O theorem and its complements by new trade theories for the Tanzanian manufacturing sector. The paper bridges the gap by applying the combination of what the theorem advocates, its complementation by Kravis, Samuelson, Romalis, and the new trade theory insights in the Tanzanian context, and introduces a new conceptualisation of the international trade function. It recommends further initiatives to encourage exports from the manufacturing sector.
Unlike classical rational choice theory assumptions, decision-makers are far less rational and not always self-interested. Decision makers normally have less than perfect information, are faced with limited time to make decisions, fall into cognitive biases and reciprocate. Behavioural economics argues that decision-makers normally face “bounded rationality” and adopt simple, intuitive “rules of thumb” instead of calculating optimal solutions for every decision they make. Using behavioural economics insights, this paper explores how people with economic goals make economic decisions under time and emotional pressure. It studies how a goalkeeper as an economic agent makes decisions during a penalty session using data from the Spanish Premier Football League from 2015 to 2020. Results show that when a goalkeeper is under time pressure, he ends up making more accurate choices and predictions owing to greater mental concentration on the issue that demands considerable attention. Moreover, the increased pressure on the ball kicker causes him to make poor decisions, giving the goalkeeper additional flexibility. However, emotions were found to influence poor prediction and decisions because they impair information processing and the capacity to solve issues through heuristic decision-making techniques. Thus, the study on how decision-making is influenced can significantly improve strategic policymaking.
The Twin Deficit Hypothesis has been extensively examined across various economic contexts, yet its applicability often depends on a country’s unique economic structure and dynamics. This study revisits the hypothesis in Tanzania, analyzing the relationship between the budget and trade deficits using quarterly time series data from 2005 to 2023. Employing a Granger Causality test within a multivariate Vector Error Correction Model, this research explores the direction of causality between the two deficits. The findings confirm a significant short and long-run relationship between the budget and trade deficits. Specifically, the results reveal a unidirectional short-run causality from the trade deficit to the budget deficit, aligning with the Current Account Targeting Hypothesis perspective of the Twin Deficit Hypothesis. Policies for effective exchange rate management, export diversification, and reducing import dependency are thus essential. These measures will lower external borrowing needs, enhance fiscal resilience, and support sustainable economic growth.
This study examines vocational education’s effectiveness in addressing youth unemployment and promoting economic self-reliance in Tanzania. Data from 394 vocational graduates were analyzed using descriptive statistics and regression models to assess the impact of vocational training on employment and economic outcomes. Results show that 83.6% of respondents believe vocational education provides essential employment skills, while 62.3% agree it enhances productivity. However, 39.3% highlight the need for reforms to better align training with labor market needs. The findings underscore vocational education's vital role in youth employment, advocating for curriculum updates and increased resources to improve system effectiveness.
This study aimed at providing new evidence on the existence of poverty trap among Uganda’s households using Uganda National Panel data. Evidence of the existence of a poverty trap is fundamental in guiding the development of sound policies and interventions targeted to assist in pulling households out of poverty trap. Analysis was based on two sets of panel data comprising 8,122 households from 3 waves (2009/2010-2011/2012) and 12,199 households from 4 waves (2013/2014-2019/2020). Using the PCA constructed asset index approach based on a parametric regression model, we show that a poverty trap exists. This is revealed by the negative quartic polynomial coefficients of the asset index and asset values (-0.004** & -0.010***) respectively. Bivariate level results confirm that 18% (1,314,000) of Uganda’s households are trapped in poverty. A comprehensive, well-structured, targeted asset accumulation and poverty trap reduction interventions including cash transfers, should be implemented by the government for poverty-trapped households.
This paper examines smallholder farmers‘ access to and use of informal credits for climate change adaptation in Hanang District, Tanzania. The paper used bivariate probit model to analyze data. The results reveal that about 75% of respondents indicated to have access to informal credit, with 68.3% actively employing credit in agriculture for climate change adaptation. The bivariate probit regression analysis shows that having good relationships with other farmers and neighbors or relatives, along with a lower perception of risk, are the most important factors that affect access and use of informal credit for climate change adaptation. Building relationships and connections among farmers through organized networking events, the implementation of risk mitigation strategies, and the promotion of financial literacy initiatives to bolster the capacities of smallholder farmers in the credit market are important factors that should be considered by policymakers and other stakeholders to enhance their adaptive capacity in the changing climate.
Many resource-poor countries are putting a lot emphasis towards improving food security but their efforts are still constrained by post-harvest losses. This paper focuses on cassava to expose the causes of post-harvest losses at household level; the stage at which farm households experience losses and the strategies used by farmers to reduce losses. Data from the National Agricultural Advisory Services were used and were analyzed using Probit model. Results indicate that post-harvest losses occur due to absence of storage facilities, pest invasion and lack of market information. Also, post-harvest losses occur at different stages even within a single household and too, households use differing strategies to reduce losses. Thus, interventions aiming at promoting food security need to supplement the efforts with enhanced mechanisms for post-harvest handling. The study recommends establishment of community ware houses for farmers’ output as well as improved agro-processing processes to reduce on wastage at household level. JEL Classification : O13, Q13, Q18
This study evaluates Tanzania’s overlapping regionalism in the EAC and SADC by analyzing its Export Intensity Index, Revealed Comparative Advantage, and Trade Complementarity Index for the period 2013–2022. The findings reveal that Tanzania enjoys stronger trade ties and a broader comparative advantage in the EAC, particularly in key exports such as fertilizers and rice, compared to a narrower focus on gold within SADC. Gold dominates exports to both blocs but highlights a critical need for diversification. The analysis identifies milled rice as holding the greatest potential for export growth in both regions. These results inform policy recommendations emphasizing diversification beyond gold and leveraging Tanzania’s comparative advantage in high-potential products to align with AfCFTA objectives. Strengthening EAC-based strategies is proposed as a model for AfCFTA harmonization due to existing robust trade relations. This study underscores the importance of targeted export promotion to enhance Tanzania’s trade competitiveness within Africa. JEL Classification: F14, F15, F53.
In developing nations, there are elevated levels of intimate partner violence (IPV) directed at women. The human capital model of health demand posits that if IPV impacts women's health, it will diminish their health capital, leading to decreased productivity, lower earnings, and reduced production of goods relevant to their individual and household well-being. This paper aims to investigate the proposition that IPV on women has an effect on household food insecurity in Tanzania. Utilizing violence data from the first round of Tanzania's national panel survey along with food security data from the second round, this study examines that hypothesis. However, the findings do not provide robust empirical support for the idea that women's abuse significantly influences household food security, whether in rural or urban settings. The study suggests potential avenues for further research in this area. JEL Classification: J12; J24; Q18
This paper focuses on the status and trends of inequality and the progressive tax system to pay for a just future in Tanzania across some selected taxable sources. It is typically desk research study dwelled on analyzing and synthesizing secondary data/information and literature concerning the issue of under resource mobilization in Tanzania. Findings of the study show that, in Tanzania, the country's tax-to-GDP ratio increased from 10% in 2004/05 to 11.8% in 2022/23, with a peak of 13.3% in 2015/16. This means in every 100 items which passes/was supposed to pass in the market, it is only 13 items which are taxed. Further, it is found that there is little wealth-related taxation in Tanzania. Thus, the poor and the working population bear the main burden, and in search for justice, this is unfair. The study recommends, that taxes on wealth are a policy instrument to address wealth inequality and could raise substantial revenue while shoring up structural weaknesses in the current income tax system. It is an additional way to raise revenues and address wealth inequality through budget justice.
This study examines the determinants of foreign direct investment (FDI) inflows in Tanzania using the Autoregressive Distributed Lag (ARDL) model with data spanning from 1970 to 2023. The ARDL approach was chosen for its robustness in handling non-stationary data with mixed order of integration and capturing both short-term and long-term dynamic relationships. The findings indicate that GDP, exchange rate and trade openness significantly influence FDI inflows. A higher GDP positively affects FDI, reflecting market attractiveness, while trade openness facilitates investment by improving market access. However, the exchange rate negatively affects FDI inflows. Policy recommendations emphasize fostering economic growth, promoting trade liberalization and stabilizing the exchange rate through effective monetary policies. Ensuring economic stability and reducing trade barriers will create a more favorable investment environment, attracting more FDI and promoting long-term economic growth. JEL Classification : F21; F43; O41.
This study investigates employment and earnings levels in Tanzania's informal and formal sectors, as well as the factors that determine them. Despite growth in the economy, insufficient job creation in the formal sector has rendered the informal sector an inevitable source of employment for youths. We use the Blinder-Oaxaca decomposition to examine the disparity between formal and informal earnings, and Quantile Regression to investigate the factors that determine earning differentials across income groups. Among key findings are: first, there are major differences in average earnings between the formal and informal sectors, with the informal sector having lower average earnings; second, women's earnings are lower in both sectors and across other sectors; and lastly, the formal sector has a higher percentage of employees who work a second job than the informal sector. Employee characteristics, gender, taking on another work, relocating to a rural location, and transferring to private employment and the informal sector are the factors that contribute to earnings disparities. The following policy implications are drawn: investing in education is crucial for raising earnings; women's participation in higher paying activities is important for empowering them; and an overall improvement in employee earnings is important for reducing the need to get a second job to supplement their incomes. JEL: E24; E26; O17
Banana is an important staple food for many people, featuring among the ten most cropped plants worldwide. This study establishes the link between banana value chain participation and household welfare using consumption as a proxy for welfare. Using panel data, methods like pooled probit, fixed effects, and Heckit models were applied. The pooled probit results show that working outside agriculture reduces the likelihood of participating in the banana value chain, while factors like the number of banana plants, harvested quantity, and organic fertilizer use increase participation likelihoods. The fixed effects model indicates that banana value chain participation, working outside agriculture, mobile phone ownership, and household size positively impact welfare, contributing to poverty reduction and food security. The Heckit model results support the fixed effects findings. Therefore, agricultural policies promoting improved banana seeds and better market access are crucial for addressing food insecurity and improving the welfare of smallholder banana farmers. JEL Classification: C33; D23; D60; L14; O17; Q13.
Deficits in basic infrastructure have been acknowledged as one of the challenges of local communities globally and this is quite relevant in the Southwestern Nigeria. Due to shortage of government funding, infrastructural deficit has continued to limit developments in Osun and Oyo states. Hence, communities’ resort to the use of user fees in addressing the funding gap. This study examines the effect of user fees on community development in these selected states. The study employs structural equation model (SEM) to analyze the research objective among 3,672 households. The result suggests that informal user fees have a negative and significant effect on the extent of community development in Osun and Oyo States, although, the willingness to pay by households has a positive effect on community development projects. The study recommends joint collaboration of local community leaders, Community Development Associations (CDA) and community members towards contribution of user fees and monitoring of same to enhance and fast track community development projects. JEL Classification: H20, H21, H72
Banks restructure client loans as a risk management strategy to ensure recovery and protect profits. While many studies examine loan restructuring, its impact on clients’ project profitability remains underexplored. This study analyses 109 projects financed by a major Tanzanian investment bank to assess this relationship. Using hierarchical linear regression, findings show that restructuring enhances the positive effect of the repayment period on project profitability while reducing the impact of repayment amount. Interestingly, interest rates appear to play no role in restructuring decisions. These results highlight the importance of risk management in banking and suggest that loan restructuring should prioritize recovery and clients’ profitability. JEL Classification: G21, G32, G33, E43, C30
FDI plays crucial role in stimulating development of various sectors in economy such as provision of skilled labour, employment creation, source of capital, management and technological transfer. Over the past 30 years, the share of FDI in World’s economy has been transformed from manufacturing sector to service sector thus creating various emerging sectors.The study employed time series secondary data for 22 years from 1999 to 2020, then used dickey-fuller and Philips perron tests for stationarity, Auto Regressive Distributed Lag (ARDL) bound test for co-integration, ARDL model to estimates long-run relationship lastly, diagnostic tests were applied to check validity and reliability of variables. The study revealed that FDI inflow in transport and storage sector have weak positive impact on economic growth while FDI inflow to other sectors have insignificant impact to economic growth. Thus, to combat such outcomes, the government is advised to attract more foreign investment to sectors with undesirable impacts with productive strategies to improve sectors performance on economic growth through establishment of favourable investment policies such as tax policies to avoid double taxation, capital account liberalization policies and financial institution policies to create conducive investment environment.
Conditional cash transfers (CCTs) and public works (PWs) programs are implemented to improve the welfare of extremely poor households in rural Tanzania. However, there is limited information on how integrated programs impact household income generation. Using the propensity score matching method, data from both treatment and control groups were analyzed, focusing on major income-generating activities in rural areas such as crop farming, livestock keeping, non-farm businesses, and casual labor. The findings reveal that the programs have not significantly impacted income- generating activities among poor households, indicating persistent difficulties in escaping the poverty cycle. Despite this, the programs have stimulated non- farm businesses, which are typically categorized as petty businesses with low returns. Encouraging outcomes were observed in some households that utilized their cash to purchase farm inputs and livestock. Implying that policymakers and program founders should consider adding productive conditions such as promoting crop farming, livestock keeping, and group savings.
Tax collection to finance public expenditure is a major challenge for developing countries. There is a concern that Multinational Enterprises (MNEs) avoid paying taxes by shifting taxable income to countries with low corporate tax rates. The paper explored the factors that determine tax revenue collection from MNEs in Tanzania. Primary data from 140 MNEs respondents, were collected, using a questionnaire and analyzed using multiple linear regression analysis. The findings indicate that the lack of comparable data for price benchmarking of transactions undertaken between MNEs to determine if they are at arm’s length affects tax revenue collection from MNEs. The availability of comparable information is critical as it enables the use by MNEs of an appropriate transfer pricing method hence appropriate tax payments. Practically, the paper highlights the need for the government to work with MNEs to address the challenge of lack of comparable data and consider the effectiveness of alternative methods to transfer pricing methods including the fixed margin method and the use of global minimum tax rate. Not including other factors which may influence tax collection from MNEs, using only primary data and use of a questionnaire to collect data are limitations that may be addressed in future studies.
