The Short and Longer Term Potential Welfare Impact of Global Commodity Inflation in Tanzania

24 Pages Posted: 20 Apr 2016

See all articles by Sebastien Dessus

Sebastien Dessus

World Bank - West Bank and Gaza Resident Mission

Date Written: October 1, 2008

Abstract

This paper uses a computable general equilibrium model to assess the welfare impact of commodity price inflation in Tanzania and possible tax policy responses in the short, medium, and long term. The results suggest that global commodity inflation since 2006 may have had a significantly negative impact on all Tanzanian households. Most of the negative impact comes from the rise in the price of oil. In contrast, food price spikes are potentially welfare improving for all Tanzanian households in the medium to long run. In comparison with nonpoor households, poor households in Tanzania may be relatively shielded from global commodity inflation because they derive a larger share of their incomes from agricultural activity and consume less oil-intensive products. Finally, the results suggest that tax policies encouraging greater agricultural production and consumption may help to reduce poverty. In contrast, policies discouraging agricultural production (such as export bans) bear the risk of increasing poverty in the long run. However, such policies would only effect at the margin (in one direction or the other) the likely impact of global commodity inflation on poverty.

Keywords: Markets and Market Access, Economic Theory & Research, Emerging Markets, Currencies and Exchange Rates, Rural Poverty Reduction

Suggested Citation

Dessus, Sebastien, The Short and Longer Term Potential Welfare Impact of Global Commodity Inflation in Tanzania (October 1, 2008). World Bank Policy Research Working Paper No. 4760. Available at SSRN: https://ssrn.com/abstract=1293173

Sebastien Dessus (Contact Author)

World Bank - West Bank and Gaza Resident Mission ( email )

P.O. BOX 54842
Jerusalem
Israel
+972 2 236 65 49 (Phone)
+972 2 236 65 43 (Fax)

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