The Welfare Effects of Structural Change and Internal Migration in Tanzania

Structural change has implications for various dimensions of development, including poverty reduction. However, the existing empirical literature on Sub-Saharan African economies, including Tanzania, has mainly focused on trends and patterns in macroeconomic or aggregate welfare indicators, largely providing a descriptive analysis of the nature of structural change and its potential welfare implications. This paper provides micro insights on structural change in Tanzania and its effect on welfare, using a recent household panel dataset, which was collected between 2015 and 2021. The results show that cross-sector labor movements are dominated by movements between agriculture and services, although most individuals studied within the two periods continue to remain in agriculture, with industry’s share in employment declining marginally. The paper shows that among the individuals studied, the number of people who slid into poverty was nearly twice the number who escaped poverty, and this is significantly influenced by the pattern of sectoral transitions experienced by the individuals. The findings show that in addition to sectoral transitions and migration being important to each other, they are both driven by similar micro factors. The paper highlights the importance of education (particularly secondary or higher education) to increasing the chances of an individual embarking on welfare-enhancing sectoral movement and associated migration across districts in Tanzania.