Can Trade Help Poor People? The Role of Trade, Trade Policy and Market Access in Tanzania

Abstract

Many development economists prescribe trade as a poverty-reducing formula. But how is this elixir supposed to work? This article contributes to the lively debate on this topic with household evidence from Tanzania — a poor country even within sub-Saharan Africa, the poorest region. About 81% of the poor work in agriculture, which accounts for 88% of the export bundle. The article describes existing poverty and then evaluates the poverty-reduction potential of trade, trade policy and market access. The article extends the analysis by simulating tariff changes and four switching scenarios that swap some poor households into trade-related sectors, such as cash cropping or tourism, to project national poverty reductions of up to 5.6% and household income increases of up to 21.5%.