Exchange rates and currency
Trade policies and export growth – employment and poverty impact in Tanzania
Exchange rate and trade reform interplay
Authors:
J. Levin; M. Olin
Publisher:
Orebro University, 2008
This paper is a 2-part document which examines the interplay between trade and exchange rate. It also looks at the impacts of trade reforms such as trade policies on employment and poverty in Tanzania.
The paper explores the determinants of trade with particular focus on Tanzanian exports. It finds that trade liberalisation and exchange rate policies have an adverse impact on employment and poverty especially in urban areas. The paper also focuses on income distribution and poverty impacts as a result of changes in relative price or exchange rate after trade liberalisation. It examines the outcome under different labour market specifications and its effects in the urban and rural regions.
The paper observes that with Tanzania’s rigid wages, trade liberalisation will lead to unemployment and casual labour wages will drop significantly. It then suggests an alternative policy option of reducing export taxes. This would have a stronger impact on exports and provide greater benefit to the less skilled. It concludes that poorer households seem to gain more from trade liberalisation compared to the richer household groups but that the short term impact of trade liberalisation is different from its long term effect.
