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2013-04-23 | project

The Vulnerability of Households Welfare to Shocks in Tanzania

Tanzania is largely an agrarian economy where over 70 percent of the population lives in the rural areas. The mainstay of the rural economy is agriculture and livestock keeping, and the agriculture production relies almost exclusively on the rainfall. As a result, changes in the rainfall pattern have a direct and immediate impact on the agriculture production, which in turn impacts on the household welfare through income and consumption. 

Since the rural economy feeds the urban population, rainfall pattern also impact the welfare of the urban households. This means that households are very vulnerable to the vagaries of weather. Vulnerability in its own has impact on the wellbeing of people because of the uncertainty it generates. Besides that, existence of high vulnerability increases the risk of a household falling into poverty. It is instructive to note that understanding the prevalence of the existence of poverty in ex post manner is not sufficient for designing policies to combat poverty, it is important to also understand the existence of poverty in ex ante perspective, that is, to understand the probability of households falling into poverty.

This has not be been done in Tanzania because the focus has remained in understanding the distribution of poverty as it exists and observed in any given time. It is also instructive to note that collection of household budget survey data takes place over a year in which each household is surveyed for a period of a month, which means that some households are surveyed in January, others in February and so on up to December. This opens up an avenue for household consumption to be influenced by seasonal factors a fact that is assumed away in the construction of poverty indices by invoking variants of the permanent income hypothesis.

Some few tests that have so far been undertaken have refuted the existence of consumption behavior consistent with the permanent income hypothesis. This means that without accounting for the seasonal factors, including the influence of rainfall pattern, in the measurement of poverty there is a risk of generating misleading poverty estimates. In general, there has not been a rigorous study to estimate the vulnerability of households’ welfare to various kinds of shocks, including the climate induced shocks and the unstable seasonal patterns in Tanzania. 

The objective of this study is therefore to study the impact of shocks and seasonal patterns on household welfare in Tanzania.