Resource information
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.
