Income distribution and economic growth in Tanzania

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University of Dar es Salaam
The purpose of this study is to examine the record on income distribution and economic growth in Tanzania. Chapter One defines the problem as being the need to examine the record on income distribution and economic growth in Tanzania, and spells out the significance of such a study. Chapter Two presents an overview of the economy. It is pointed out that Tanzania has a very small GDP (at US $3.108 billion in 1987) and that Tanzania belongs to the group of the twenty five poorest countries in the world. Agriculture accounts for about 80% of foreign exchange earnings and supports about 90% of the population. Since 1979 Tanzania has experienced an unprecedented economic crisis. Chapter Three reviews literature on income distribution and economic growth. It is stated that for the study of income distribution in Tanzania some aspects of both the classical and neoclassical distribution theory are relevant. It is also argued that within the context of developing countries such as Tanzania, a state interventionist economic policy as well as the development strategy pursued greatly influence and determine the pattern of income generation as well as the pattern of income distribution and economic growth. It is pointed out that modern economic growth theory has concerned itself with conditions that stimulate or impede the growth process from the supply side. The growth problem can be posed as one of harnessing and augmenting available resources of labour, capital and technology to meet the competing demands upon them. Economic growth is interpreted as the growth in the capacity of the economy to meet individual and collective demands for basic as well as for other necessities of life. Chapter Four discusses the historical setting of income distribution in Tanzania. Chapter Five examines the record on household and regional income distribution in Tanzania. It is found out that there was an increase in household income inequality for both rural and mainland Tanzania during the 1970s and 1980s. It is pointed out that the Kuznets' hypothesis is valid in the Tanzanian situation. However, it is pointed out that Kuznets does not say much about the crisis years. Chapter Six examines the record on structural change and economic growth in Tanzania. It is found out that the structural changes that have occurred have been insignificant in altering the basic structure of employment and hence of sources of income; and that agr culture still remains the economy's crucial sector in 1988 as it was in 1960. It is also found out that capital and skill intensive import substitution industrialization has led to the raising of the share of capital in income and to the creation of a few highly skilled and highly paid jobs. As regards economic growth it is found out that real GDP growth was good during the 1950-59 period as well as the 1960-69 period. There were serious problems with growth in the 1980-86 period. Real income per capita declined at the rate of 1.9% per year over the 1980-86 period. In Chapter Seven an analysis of select Tanzania policies with respect to income distribution and economic growth is made. It is argued that during the 1967-1985 period Tanzania tended to implement policies which were good for equity but bad for growth. However, overemphasis on equity did not lead to significant reductions in income inequa lity across individuals, districts and regions. Finally, Chapter Eight sums up the main findings and issues raised in Chapters One through Seven. 1t is recommended that policy makers in Tanzania ought to continue with the policy reform measures that began with the 1984/85 Budget. It is also recommended that Tanzania policy makers should adopt sound growth-oriented and outward-looking policies designed to encourage investment and promote desirable structural change. It is further recommended that there ought to be instituted supply enhancing measures: measures that promote savings, increase export capacity and improve efficiency in resource use.
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Income distribution, Tanzania economic development
Bukuku, E(1989) Income distribution and economic growth in Tanzania, PhD dissertation, University of Dar es Salaam. Available at (