In Quest of Inclusive Growth: Exploring the Nexus between Economic Growth, Employment, and Poverty in Tanzania

Tanzania’s impressive economic growth during the past decade has not resulted in significant poverty reduction. It is in that context that this study seeks to analyze the nexus between economic growth, employment and poverty in a manner that contributes to the understanding of how the rate poverty reduction can be accelerated. The paper presents a framework for the analysis of the nexus between economic growth, employment and poverty reduction and attempts an application of that framework. The key to the analytical framework is growth of employment in relation to output growth and structural transformation of employment towards sectors and activities with higher productivity so that output growth translates into higher incomes of the poor. Given the limitations of data in Tanzania and the broad scope of the analytical framework mentioned above, its application in the present paper remains limited, partial, and exploratory. While the change in the structure of employment has been very small, the elasticity of employment with respect to output growth has been rather low. The incidence of poverty is linked to the type and sector of employment: poverty being higher amongst those in agriculture and in self-employment. Amongst the self-employed, those without any additional employee have a higher incidence of poverty compared to those with some employees.