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The short and longer term potential welfare impact of global commodity inflation in Tanzania

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  • Dessus, Sebastien
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    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.

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    Bibliographic Info

    Paper provided by The World Bank in its series Policy Research Working Paper Series with number 4760.

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    Date of creation: 01 Oct 2008
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    Handle: RePEc:wbk:wbrwps:4760

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    Related research

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

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    1. Aksoy , M. Ataman & Isik-Dikmelik, Aylin, 2008. "Are low food prices pro-poor ? net food buyers and sellers in low-income countries," Policy Research Working Paper Series 4642, The World Bank.
    2. Dessus, Sebastien & Herrera, Santiago & de Hoyos, Rafael, 2008. "The impact of food inflation on urban poverty and its monetary cost : some back-of-the-envelope calculations," Policy Research Working Paper Series 4666, The World Bank.
    3. Wodon, Quentin & Tsimpo, Clarence & Backiny-Yetna, Prospere & Joseph, George & Adoho, Franck & Coulombe, Harold, 2008. "Potential impact of higher food prices on poverty : summary estimates for a dozen west and central African countries," Policy Research Working Paper Series 4745, The World Bank.
    4. Ravallion, Martin, 1996. "Famines and economics," Policy Research Working Paper Series 1693, The World Bank.
    5. Thurlow, James & Wobst, Peter, 2003. "Poverty-focused social accounting matrices for Tanzania," TMD discussion papers 112, International Food Policy Research Institute (IFPRI).
    6. Mitchell, Donald, 2008. "A note on rising food prices," Policy Research Working Paper Series 4682, The World Bank.
    7. Ivanic, Maros & Martin, Will, 2008. "Implications of higher global food prices for poverty in low-income countries," Policy Research Working Paper Series 4594, The World Bank.
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