Aggregate Export and Food Crop Supply Response in Tanzania

Tanzania is among the many African countries that have engaged in agricultural liberalisation since the mid-1980s, in the hope that reforms which introduce price incentives and efficient marketing will encourage producers to respond. This paper assesses that claim by examining the supply response of agricultural output in Tanzania. Our estimates suggest that agricultural supply response is quite high so that the potential for agricultural sector response to liberalisation of agricultural prices and marketing may be quite significant. The long-run elasticity of food crop output to relative prices was almost unity; both food and aggregate short-run response was estimated at about 0.35. Liberalisation of agricultural markets, where it increases the effective prices paid to farmers, can be effective in promoting production, although complementary interventions, to improve infrastructure, marketing, access to inputs and credit, improved production technology etc, are probably necessary. Outline