Agriculture-led Industrialization for Inclusive Growth in Tanzania

Abstract

This study analyses the interdependence between industry and agriculture sectors for
socio-economic development and poverty reduction in Tanzania during the 1970–2018
period. The study used the Autoregressive Distributed Lag (ARDL) bound test
approach and Granger causality test to uncover the relationship. The study found a
stable short-run and long-run relationships between agriculture and industrial
sectors. Gross fixed capital formation and trade openness have significant short-run
and long-run relationship with the growth of the industrial sector. While inflation
affect positively industrial growth in the short-run, its impact in the long-run is
negative. Moreover, there is a bi-directional causality between agriculture and
industrial sectors. Given the importance of agriculture to industrialisation and
inclusive growth, the study recommends policies, strategies and further efforts to
increase agriculture productivity, output and income. The industrialization policy, as
broad as it may be, must build the nexus between the agriculture, manufacturing and
other non-farm rural sectors. Equally important is the need to put in place a conducive
environment for promoting investment in both industry and agriculture sectors.
JEL Classification: Q18; L16; I31.