To Örebro University

In this study, we have used Tanzania as a case to illustrate how a simulation model can beused to evaluate the impact of aid and the trade-offs between public spending categories and theirimpact on income poverty and other social development targets. Our results suggest the following.First, under plausible growth, fiscal and foreign assistance assumptions, in line with observedpatterns, the enormous difficulty of achieving most millennium development goals (MDGs) by2015 is evident. Second, there existed trade-offs between the various MDGs, in particular betweenachievements for poverty and other social development targets.

In this paper, we explore the short-term welfare impact of higher maize prices on different regions and socioeconomic groups in Kenya. We find that approximately 80% of the population would be negatively affected by higher maize prices and that poor households would lose a larger proportion of their welfare than wealthy households. More specifically, rural landless households would lose the most, whereas households with landholdings of five acres or more would gain. We simulate a 25% increase in maize prices and find that rural poverty would increase by approximately 1 percentage point and urban poverty by 0.5 percentage points. Moreover, the impact differs among regions; poverty would increase by 3 percentage points in the rural parts of Coast Province, whereas it would be almost unchanged in the rural parts of Western Province. Furthermore, we relax the standard assumption that consumer and producer prices change in the same proportions and allow for heterogeneity in marketing margins among districts. We demonstrate that relaxing this assumption substantially affects the results and that the results from previous research were thus likely biased.

In this paper we estimate the amount of tax evasion in customs authorities in both Kenya and Tanzania by calculating measurement errors in reported trade flows between the two countries and correlate those errors with tax rates. We find that the measurement error is correlated with the tax rates in Tanzania.We also introduced a third country into our analysis, the United Kingdom, and tax evasion seems to be more severe in trade flows between Kenya and Tanzania compared to trade flows between the United Kingdom and Kenya/Tanzania. Finally we also find that the tax evasion coefficient is lower in the Kenya–United Kingdom case compared to the Tanzanian– United Kingdom case which suggests that tax evasion is more severe in the Tanzanian customs authority.

The spread of value-added tax (VAT) in developing countries has been dramatic since the beginning of 1990’s. Adopted by more than 130 countries, including many of the poorest, VAT has been, and remains, the key of tax reform in many developing countries. While adopting VAT, there are arguments for and against uniform general VAT system. A uniform and general VAT on all commodities is considered to be efficient and less distortionary. On the other hand, from the distributional perspective many goods especially food is exempted from VAT as low income households spend a high share of income on food. The contribution of this study is to analyze the income distribution and welfare impact of VAT reform when the food sectors are divided into local markets and supermarkets. A Computable General Equilibrium (CGE) model is used to evaluate the consequences of VAT reforms for Bangladesh. Our simulation results show that, a VAT reform that exempts the agriculture sector and local market food commodities provides the best welfare and distributional impact.

Kenya has ascribed to the Millennium Declaration and is already in the process of mobilising resources and instituting measures to achieve Millennium Development Goals (MDGs). A MDGs status report on Kenya indicates that progress has been made towards achieving the goal of universal primary education. However, the Government will need to scale-up its efforts beyond the current momentum, if the other goals are to be realised by 2015. A preliminary conclusion is that the resource requirements are not extremely large to reach the MDGs in Kenya. If the resources are effectively used and targeted to MDG sectors they could have a substantial impact on whether Kenya would reach the MDGs or not. Some targets seem to be easier to reach than others. The target of 100 percent completion in primary school can be achieved with some additional resources targeted to the primary sector. However, a substantial increase of resources is needed at secondary and tertiary level of education to reach other goals set by the Kenyan government. Even if higher investment in all MDG-sectors is needed the water sector seems to be requiring a substantial increase compared to what have been invested in the past. With regard to poverty our results show that annual average real GDP growth rate of around 8 percent would be enough to meet the poverty target of reducing the number of poor by half.

In this paper we discuss the impact of scaling-up aid in Tanzania using an economy-wide dynamic CGE model. The major conclusions coming out from this work is that productivity effects matter. If additional aid and consequently increased public spending has a positive impact on productivity this would spur GDP growth and reduce the risk of an appreciating real exchange rate. In a way this resembles previous results in the aid-growth literature that aid has a positive impact on growth in a country with good economic policies assuming that good policies have a positive impact on productivity. Presenting various scenarios on the impact of additional aid a sustained GDP growth rate of around 7 percent would be possible to achieve in a modest scaling-up aid scenario without any significant changes in the real exchange rate.

This study on Tanzania is part of a series of annual studies, undertaken by various Swedish universities and academic research institutes in collaboration with Sida. The main purpose of these studies is to enhance our knowledge and understanding of current economic development processes and challenges in Sweden's main partner countries for development co-operation. The hope is also that they will have a broader academic interest and that the collaboration will serve to strengthen the Swedish academic resource base in the field of development economics. The study contains an analysis of the determinants of export in Tanzania in light of the changing composition of exports in the past years. This is followed by an analysis of the impact of trade reforms on employment and poverty. The report was prepared by Jörgen Levin and Mikael Ohlin at the Department of Economics at Örebro University.

This paper discusses some issues on how to evaluate the impact of HIPC debt relief in the cases of Tanzania and Zambia using two computable general equilibrium models. Within our relatively simple model framework, we found that the macroeconomic impact of debt relief is modest. One reason for this relatively modest impact is that the annual injection of additional resources relative to current actual debt service is small in both cases, which implies that the impact of debt relief per se would be expected to be modest. However, as illustrated in the case of Tanzania the impact could be considerably higher if additional public investment succeeds to improve private sector productivity.