Structural Adjustment and Intersectoral Shifts in Tanzania

213 Pages·2001·0.69 MB·English

by  Wobst, Peter

RESEARCH
REPORT
1 1 7
IFPRI
Structural
Adjustment and
Intersectoral Shifts
in Tanzania
A Computable General
Equilibrium Analysis
Peter Wobst
INTERNATIONAL FOOD POLICY RESEARCH INSTITUTE
IFPRIBoardofTrustees
2001
GeoffMiller,Chair,Australia
RebecaGrynspanMayufis,ViceChair,CostaRica
IsherJudgeAhluwalia,India
BabaDioum,Senegal
WencheBarthEide,Norway
ArieKuyvenhoven,Netherlands
SusumuMatsuoka,Japan
SolitaCollasMonsod,Philippines
BennoNdulu,Tanzania
SylviaOstry,Canada
G.EdwardSchuh,U.S.A.
FrancesStewart,U.K.
RobertoE.VazquezPlatero,Uruguay
WenSimei,People’sRepublicofChina
PerPinstrup-Andersen,DirectorGeneral,ExOfficio,Denmark
T
heInternationalFoodPolicyResearchInstitute(IFPRI)isoneof16Future
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are members of the Consultative Group on International Agricultural Research.
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WorldBank;WorldResourcesInstitute;andWorldVision.
Structural
Adjustment and
Intersectoral Shifts
in Tanzania
A Computable General
Equilibrium Analysis
Peter Wobst
ResearchReport117
InternationalFoodPolicyResearchInstitute
Washington,D.C.
Copyright © 2001 International Food Policy Research
Institute
All rights reserved. Sections of this report may be
reproduced without the express permission of but with
acknowledgment to the International Food Policy
Research Institute.
Dissertation, University of Hohenheim (D100).
Library of Congress Cataloging-in-Publication Data
Wobst, Peter.
Structural adjustment and intersectoral shifts in Tanzania:
a computable general equilibrium analysis / Peter Wobst.
p. cm.
Includes bibliographical references.
ISBN 0-89629-120-0 (paper)
1. Tanzania—Economic conditions—1964- 2.
Tanzania—Economic policy. 3. Equilibrium (Econom-
ics)—Mathematical models. 4. Tanzania—Politics and
government—1964- I. International Food Policy
Research Institute.
HC885 .W63 2001
330.9678—dc21 2001016691
In memory of my dear brother Joachim

Contents
List of Tables vi
List of Figures viii
Acronyms and Abbreviations x
Foreword xii
Acknowledgments xiii
Summary xiv
1. Introduction 1
2. From African Socialism to a Free Market Economy 7
3. The General Equilibrium Approach 27
4. A Social Accounting Matrix and General Equilibrium Model for
Tanzania 45
5. The Effects of Macroeconomic Policies on Growth, Equity,
and Intersectoral Shifts 78
6. Results, Achievements, and Conclusions 129
Appendix A: Recent Economic Indicators and Policies 134
Appendix B: Documentation of Macrosam Cell Entries 140
Appendix C: Documentation of Data Entries in the Microsam 144
Appendix D: 1992 Social Accounting Matrix for Tanzania 154
Appendix E: Structure of the Economy 162
Appendix F : Supplementary Tables on the Policy Bias against
Agriculture 164
Appendix G : Sensitivity of the Modeling Results with Respect to
CES and CET Elasticities 171
References 176
About the Author 193
v
Tables
2.1 Annual exchange rates, 1985–98 20
2.2 Monthly exchange rates, 1995–96 21
2.3 Deposit and lending rates, 1992–98 26
4.1 Macroeconomic social accounting matrix 50
4.2 1992 macrosam for Tanzania (millions of 1992 TSh) 51
4.3 Accounts of the 1992 microsam for Tanzania 53
4.4 New macrosam for 1992 (millions of 1992 TSh) 58
4.5 Parameters and variables of the Tanzanian CGE model 61
4.6 Initial macroeconomic model closures 72
5.1 Policy bias experiments from initial base: Flexible exchange rate 86
5.2 Policy bias experiments from initial base: Fixed exchange rate 88
5.3 Policy bias experiments from synthetic base: Flexible exchange rate 89
5.4 Policy bias experiments from synthetic base: Fixed exchange rate 90
5.5 Sectoral structure of the Tanzanian economy based on 1992 SAM 99
5.6 Agricultural terms of trade (TOT) (value-added) and price indices
under mobile versus fixed sectoral capital demand
in nonagriculture 108
5.7 Sectoral structure of total factor payments based on 1992 SAM 110
5.8 Average marketing margin coefficients and respective total
values for aggregate agriculture and nonagriculture 121
A.1 Country data for Tanzania: Economic and social indicators 134
A.2 Tanzania: Recent policy performance 135
A.3 Tanzania: Physiographic regions 138
A.4 Tanzania’s domestic tax policies during the 1990s 139
C.1 Distribution of labor value-added (million TSh and percent) 148
C.2 Final household consumption (million TSh and percent) 150
C.3 Individual income tax (rates, values, and shares per household
group in million TSh and percentage) 151
C.4 Household savings (rates, values, and shares per household
group in million TSh and percent) 151
D.1 1992 social accounting matrix for Tanzania 155
vi
E.1 Structure of the economy 162
F.1 Policy bias experiments from initial base: Free
exchange rate 164
F.2 Policy bias experiments from initial base: Fixed
exchange rate 165
F.3 Policy bias experiments from synthetic base: Free
exchange rate 165
F.4 Policy bias experiments from synthetic base: Fixed
exchange rate 166
F.5 Real sectoral value-added: Experiment series one 166
F.6 Real sectoral value-added: Experiment series two 167
F.7 Real sectoral value-added: Experiment series three 167
F.8 Real sectoral value-added: Experiment series four 167
F.9 Nominal GDP indices: Experiment series one 168
F.10 Nominal GDP indices: Experiment series two 168
F.11 Nominal GDP indices: Experiment series three 168
F.12 Nominal GDP indices: Experiment series four 169
F.13 Percentage change of deflated household consumption:
Experiment series one 169
F.14 Percentage change of deflated household consumption:
Experiment series two 169
F.15 Percentage change of deflated household consumption:
Experiment series three 170
F.16 Percentage change of deflated household consumption:
Experiment series four 170
G.1 Elasticity variation and exchange rate depreciation 172
G.2 Percentage deviation of the depreciation rates with respect to the
experiment with initial elasticity values 172
G.3 Real GDP shares of foreign trade 173
G.4 Percentage change of real value-added to the base run in
terms of the variation of the CES elasticities of substitution 173
G.5 Percentage change of real value-added to the base run in terms
of the variation of the CES elasticities of transformation 174
vii
Figures
2.1 Annual growth rate of GDP at factor costs, 1989–99 16
2.2 Land use in mainland Tanzania 24
5.1 Domestic price transmission mechanism 80
5.2 Changes in deflated household consumption 92
a. Experiment series one 92
b. Experiment series two 92
c. Experiment series three 93
d. Experiment series four 93
5.3 Composition of merchandise exports 94
5.4 Composition of merchandise imports 95
5.5 Sectoral direct and indirect import content, 1992 96
5.6 Exchange rate depreciation and trade balance 101
5.7 Total real foreign trade 102
5.8 Real foreign trade (percentage change) 102
5.9 Total nominal foreign trade 103
5.10 Nominal foreign trade (percentage change) 103
5.11 Real export values 105
5.12 Composition of exports 105
5.13 Agricultural terms of trade with sectoral capital demand 106
5.14 Agricultural terms of trade with mobile sectoral capital demand 107
5.15 Export versus nonexport agricultural terms of trade 109
5.16 Export versus nonexport agricultural price indices 109
5.17 Export versus nonexport agricultural value-added 112
5.18 Export versus nonexport agricultural labor demand 113
5.19 Export versus nonexport agricultural capital demand 113
5.20 Export versus nonexport agricultural return to land 114
5.21 Exchange rate depreciation under changing marketing margins 119
5.22 Agricultural terms of trade 119
5.23 Final demand price of trade services 120
5.24 Nominal changes in selected sectoral value-added 122
5.25 Nominal changes in selected sectoral value-added 123
viii