Export diversification and poverty reduction in Tanzania; non-traditional exports perspective
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Date
2011
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Publisher
University of Dar es Salaam
Abstract
The purpose of the study was to examine the relationship between export diversification and poverty reduction in Tanzania. The objective was to explore the role of export diversification in poverty reduction strategies following recent growth of non-traditional exports and its perceived potential to contain poverty in the country. Both horizontal and vertical export diversification were examined; horizontal export diversification was proxied by the number of export sectors classified by the Standard International Trade Classification (SITC) at the three-digit level while vertical export diversification was measured by the share of manufactured exports to total exports. The study adopted a modified Solow-Swan growth model (1992) to examine the relationship between export diversification and poverty reduction. Applying the OLS technique on time series yearly (1980-2009), the study found out that the progress made in horizontal export diversification was minimal to propel significant income per capita growth so as to warrant substantial poverty reduction in the country. Vertical export diversification contribution to income per capita growth was also found to be insignificant. The possible explanation is country’s weak industrial base. Drawing lessons from East Asia and some other African countries it was found that deep horizontal export diversification and vertical export diversification were significant factors in enhancing income per capita growth; however in East Asia income per capita growth led by vertical export diversification was more impressive than that of horizontal export diversification in addressing poverty. The study concludes that export diversification carries the potential of containing poverty in the country; however its effects to trickle down in the lives of people in form of reduced poverty, an integrated package of policies and strategies need to be in place in order to spearhead deep horizontal and vertical export diversification in Tanzania. These include, enhancing both domestic and foreign direct investment in non-traditional products as well as in Manufacturing sector, human capital development, strengthening quality of institutions, addressing infrastructural problems, easing accessibility to credits, putting in place appropriate trade policies and intervening at strategic points through regulation and incentives as pre-requisites for enhanced export diversification.
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Keywords
Exports, Foreign trade promotion, Povert seduction, Tanzania
Citation
Francis, L (2011) Export diversification and poverty reduction in Tanzania; non-traditional exports perspective master dissertation, University of Dar es Salaam. Available at http://41.86.178.3/internetserver3.1.2/detail.aspx