For over a quarter century (1991 2018) Tanzania has been experimenting with structural adjustment reforms that have seen impressive macroeconomic performance and sustained growth in one hand but a sluggish poverty reduction in the other hand. Using four rounds of successive Tanzania National Household Budget Surveys (1991/92, 2000/01, 2011/12 and 2017/18),we construct synthetic (pseudo) panel data to investigate the role of sources of income (labour diversification)on household welfare (consumption expenditure).The analysis shows that over time the share of households with farm income sources has declined with an increasing share of households with non-farm income (though at a slower pace); which is primary evidence of the signs of the structural transformation in the economy. Diversification as means of accumulation hypothesis and in line with previous studies in the region and in Tanzania, the study findings show that household income diversification significantly improves household welfare. However, there are substantial differences in the impacts, with a wider impact for rural than urban households. Our results are robust to alternative measures of household income diversification, the share of workers in farm and non-farm activity. Clearly, if the government is serious about addressing poverty in general and rural poverty, it has therefore to enhance rural infrastructure that enhances the returns of both on-farm and off-farm activities.
STEG Working Paper Series
• Research Theme 0: Data, Measurement, and Conceptual Framing,
Research Theme 2: Labour, Home Production, and Structural Transformation at the Level of the Household
Income Diversification and Household Welfare in Tanzania 1991-2018: Evidence from a Synthetic Panel
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