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Small Scale Industries, Transactions Costs and Reform: The Case of Tanzania

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  • Sjöquist, Pernilla

    (Department of Economics)

Abstract

There has been a revival of interest in small scale industries and their linkages with a nation's institutional arrangements, among both academicians and policy makers. Extending the definition of institutions to include formal and informal rules, this paper attempts to identify these lingages using the technique of transaction costs. Applying this to the economic environment of small firms in Tanzania, a country presently undergoing transition from a socialist to a market oriented economic system, it is found that transaction costs have been high among Tanzania's small firms owing to certain institutional factors which have shaped the country's developmental history. Among the most important identified are tha official ideology alien to small scale production, direct intervintion of the government and weak linkages between parastatals and small firms. It is argued that institutional rigidities constitute a main source of high transaction costs during the period of transition, as well as a challenge for the development of a dynamic small scale industrial sector in the future.

Suggested Citation

  • Sjöquist, Pernilla, 1996. "Small Scale Industries, Transactions Costs and Reform: The Case of Tanzania," SSE/EFI Working Paper Series in Economics and Finance 124, Stockholm School of Economics.
    • Handle: RePEc:hhs:hastef:0124
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    References listed on IDEAS

    as
    1. Levy, Brian, 1993. "Obstacles to Developing Indigenous Small and Medium Enterprises: An Empirical Assessment," The World Bank Economic Review, World Bank, vol. 7(1), pages 65-83, January.
    2. Kornai, Janos, 1992. "The Socialist System: The Political Economy of Communism," OUP Catalogue, Oxford University Press, number 9780198287766, Decembrie.
    3. Hyuha, M. & Ndanshau, M.O. & Kopokola, J.P., 1993. "Scope, Structure and Policy Implications of Informal Financila Markets in Tanzania," Papers 18, African Economic Research Consortium.
    4. Bagachwa, M. S. D. & Naho, A., 1995. "Estimating the second economy in Tanzania," World Development, Elsevier, vol. 23(8), pages 1387-1399, August.
    5. Aili Mari Tripp, 1989. "Defending the Right to Subsist: the State vs. the Urban Informal Economy in Tanzania," WIDER Working Paper Series wp-1989-059, World Institute for Development Economic Research (UNU-WIDER).
    6. Hyden, Goran & Karlstrom, Bo, 1993. "Structural adjustment as a policy process: The case of Tanzania," World Development, Elsevier, vol. 21(9), pages 1395-1404, September.
    7. Nehemiah E. Osoro, 1993. "Revenue productivity implications of tax reform in Tanzania," Working Papers 20, African Economic Research Consortium, Research Department.
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    More about this item

    Keywords

    Small industries; institutions; transaction costs; transition; Tanzania;
    All these keywords.

    JEL classification:

    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa
    • P20 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - General

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