Rural Policies, Price Change and Poverty in Tanzania: An Agricultural Household Model-Based Assessment

CIRPÉE Working Paper 12-29

51 Pages Posted: 28 Aug 2012 Last revised: 12 Feb 2015

See all articles by Luca Tiberti

Luca Tiberti

Université Laval; Partnership for Economic Policy (PEP)

Marco Tiberti

University of Florence

Date Written: January 27, 2015

Abstract

Exogenous shocks to farmers’ consumption, production and labour market decisions are rarely considered accurately. For farm households, under labour market imperfections, such decisions are often interlinked. This calls for non-separable agricultural household models. According to this framework, second-order (or behavioural) effects include a direct (i.e., supply or demand reactions due to an exogenous shock) and an indirect (i.e., supply or demand adjustments to the endogenous variations in the shadow wage generated by the exogenous shock) component. Under large price changes or following structural interventions, such as those concerning land redistribution or mechanization practices, neglecting such second-order effects on consumption and production can bias the final impact on household welfare. The main objective of this study is thus to develop a robust and comprehensive tool to evaluate the effect on household welfare of different agricultural policies in Tanzania and food price changes. A two-stage estimation strategy is adopted: the shadow price of labour is first estimated and then used to estimate production and demand systems as well as labour market functions. These models are subsequently used to simulate the effect on household welfare of a hypothetical 40% increase in the price of cereals and other crops and a hypothetical 10% increase in the hectares of arable land and in the use of ox-ploughs. The results are finally compared with the case in which a separable model is adopted.

Keywords: Agricultural household models, poverty, agricultural policies, Tanzania

JEL Classification: D12, O12, O13, Q12, Q18

Suggested Citation

Tiberti, Luca and Tiberti, Marco, Rural Policies, Price Change and Poverty in Tanzania: An Agricultural Household Model-Based Assessment (January 27, 2015). CIRPÉE Working Paper 12-29, Available at SSRN: https://ssrn.com/abstract=2137235 or http://dx.doi.org/10.2139/ssrn.2137235

Luca Tiberti (Contact Author)

Université Laval ( email )

2214 Pavillon J-A. DeSeve
Quebec, Quebec G1K 7P4
Canada

Partnership for Economic Policy (PEP)

P.O. Box 30772-00100
ICIPE - Duduville Campus, Kasarani
Nairobi
Kenya

Marco Tiberti

University of Florence ( email )

Piazza di San Marco, 4
Florence, 50121
Italy

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