Poverty and inequality during structural adjustment in rural Tanzania

\_PS I 6 Lx4I POLICY RESEARCH WORKING PAPER 1641 Poverty and Inequality Growth attributed to structural adjustment has During Structural benefited the population Adj.ustment in Rural generally, shifting a significair- portion of the populatior Tanzania from below the poverty line to above it. Only that smanller fraction of the population M. Luisa Ferreira with extremely low incomes was unable to benefit fron the economy's impr-oved performance - probably because the liberalization process that encouraged growth rewarded those wvith education, excluding from benefits those with little education. The World Bank Policv Research Department Transition Economics Division August 1996  [)Kicy RESFARCH WORKING PAPER 1641 Summary findings Ferreira rmeasures structilral adjustment's impact on income distribution eroded some of the potential for growth and on the poor in Tanzania. Adjustment reforms povertv reduction that would halve otherwise restIe1Cd have contributed to robtist growth. The rural average from growth. per capita inconie in 1991 was, in real terms, In both years, the stock of human capital was low for signiticatitlv higher than in 1983. 'he Economilic the poor, as measured by educational achievement. Recovery Program, launiched in 1986, has positively Possiblv the lower incidence but greater severity ot affected income, althotigh the increase is not vet poverty is attributable to a liberalization process that reflected in such basic social indicators as infanit rewards those with education, who are better able to mortality rates or levels of primary schooling, respond to new opportunities. 'his suLggests the Structural adjustmi-tent appears to have benefited many importance of improvinig the quantity and quality of poor households. The population living in poverty education to increase the ability of the poor to benefitr declined frotim 65 percent in 1983 to 51 percent in 1991. from market reforms. Targeting humnan cap'tal Tlhe population near the poverty line bene'fited the most, investments to the very poor shouild be a high priority while those with extremely low mcomnes appear to thave during adjustnleit. bhoimc somewhat poorer. Increases in the inequality of This paper - a product of the Transition Economics Division, Policy Research Department -- is part of a larger effort in the department to study the social effects of transition. Copies of the paper are available free fromii thte WXorld Bank, 18 1 X H Street NW, Washington, DC 20433. Please contact Helen T'addese, room J4-200, telephone 202-473-1086, fax 20!- 473-8299. Interinet address htaddese(