Tanzanian Economic Review

The The Role of Past Information, Time, and Emotional Pressure in Heuristic Decision-Making

James Albanus, Martin Chegere — Sat, 28 Jun 2025 00:00:00 +0000

Unlike classical rational choice theory assumptions, decision-makers are far less rational and not always self-interested. Decision makers normally have less than perfect information, are faced with limited time to make decisions, fall into cognitive biases and reciprocate. Behavioural economics argues that decision-makers normally face “bounded rationality” and adopt simple, intuitive “rules of thumb” instead of calculating optimal solutions for every decision they make. Using behavioural economics insights, this paper explores how people with economic goals make economic decisions under time and emotional pressure. It studies how a goalkeeper as an economic agent makes decisions during a penalty session using data from the Spanish Premier Football League from 2015 to 2020. Results show that when a goalkeeper is under time pressure, he ends up making more accurate choices and predictions owing to greater mental concentration on the issue that demands considerable attention. Moreover, the increased pressure on the ball kicker causes him to make poor decisions, giving the goalkeeper additional flexibility. However, emotions were found to influence poor prediction and decisions because they impair information processing and the capacity to solve issues through heuristic decision-making techniques. Thus, the study on how decision-making is influenced can significantly improve strategic policymaking.

Economic and Employment Outcomes of Youth Vocational Education in Tanzania

William George — Sat, 28 Jun 2025 00:00:00 +0000

This study examines vocational education’s effectiveness in addressing youth unemployment and promoting economic self-reliance in Tanzania. Data from 394 vocational graduates were analyzed using descriptive statistics and regression models to assess the impact of vocational training on employment and economic outcomes. Results show that 83.6% of respondents believe vocational education provides essential employment skills, while 62.3% agree it enhances productivity. However, 39.3% highlight the need for reforms to better align training with labor market needs. The findings underscore vocational education's vital role in youth employment, advocating for curriculum updates and increased resources to improve system effectiveness.

Manufacturing Exports Drivers in Tanzania: The applicability of H-O Theorem

Mugisha Rweyemamu — Sat, 28 Jun 2025 00:00:00 +0000

This paper analyses the drivers of manufacturing exports in Tanzania to demonstrate the applicability of the Heckscher–Ohlin theorem through new trade theories in the manufacturing sector. The study hypothesises that: the labour force positively determines manufacturing exports; GDP has a positive impact on manufacturing exports; and manufacturing production has a positive impact on manufacturing exports. The paper employed the Autoregressive Distributed Lags (ARDL) approach. Lagged manufacturing exports, labour force and trade liberalisation were found to be significant drivers of manufacturing exports. The findings support the H-O theorem and its complements by new trade theories for the Tanzanian manufacturing sector. The paper bridges the gap by applying the combination of what the theorem advocates, its complementation by Kravis, Samuelson, Romalis, and the new trade theory insights in the Tanzanian context, and introduces a new conceptualisation of the international trade function. It recommends further initiatives to encourage exports from the manufacturing sector.

Do Poverty Traps Exist in Uganda? Household Level Evidence from Panel Data

Alex Aliga, JohnBosco Oryema, susan Kavuma — Sat, 28 Jun 2025 00:00:00 +0000

This study aimed at providing new evidence on the existence of poverty trap among Uganda’s households using Uganda National Panel data. Evidence of the existence of a poverty trap is fundamental in guiding the development of sound policies and interventions targeted to assist in pulling households out of poverty trap. Analysis was based on two sets of panel data comprising 8,122 households from 3 waves (2009/2010-2011/2012) and 12,199 households from 4 waves (2013/2014-2019/2020). Using the PCA constructed asset index approach based on a parametric regression model, we show that a poverty trap exists. This is revealed by the negative quartic polynomial coefficients of the asset index and asset values (-0.004** & -0.010***) respectively. Bivariate level results confirm that 18% (1,314,000) of Uganda’s households are trapped in poverty. A comprehensive, well-structured, targeted asset accumulation and poverty trap reduction interventions including cash transfers, should be implemented by the government for poverty-trapped households.

Understanding the Complementarity and Substitutability of Cooking fuels in Developing Countries: Evidence from 2020/21 Tanzania National Panel Survey

Samwel Saimon Lwiza, Monica Sebastian Kauky — Sat, 28 Jun 2025 00:00:00 +0000

Increasing access to alternative energy sources in developing countries might be a potential for multiple energy consumption rather than switching from traditional to modern ones. This study aims to examine the complementarity and substitutability of cooking fuels and factors influencing households’ choices of such fuels in developing countries. Two categories of cooking energy were considered: traditional (dirty) fuels - firewood, charcoal and kerosene; and modern (cleaner) fuels - Liquefied Petroleum Gas (LPG) and electricity. Based on a nationally representative sample of 5,199 households from the Tanzania National Panel Survey (NPS) of 2020/21, results from a Multivariate Probit model indicate that there is strong substitutability between traditional and modern fuels. Moreover, substitutability exists between solid fuels i.e., firewood and charcoal, while cleaner sources complement each other. Households’ cooking energy decisions were observed to be influenced by demographic and socioeconomic factors such as age, education, dependency ratio, wealth status, house ownership and dwelling location. In light of these findings, the study recommends appropriate policy packages for fastening energy transition in developing countries.

Does Finance Matters in Climate Change Adaptation? Understanding Factors Affecting Smallholder Farmers Access and Use of Informal Credits for Climate Change Adaptation in Semi-arid Mountainous Areas of Hanang District, Tanzania.

Jackson Sawe — Sat, 28 Jun 2025 00:00:00 +0000

This paper examines smallholder farmers‘ access to and use of informal credits for climate change adaptation in Hanang District, Tanzania. The paper used bivariate probit model to analyze data. The results reveal that about 75% of respondents indicated to have access to informal credit, with 68.3% actively employing credit in agriculture for climate change adaptation. The bivariate probit regression analysis shows that having good relationships with other farmers and neighbors or relatives, along with a lower perception of risk, are the most important factors that affect access and use of informal credit for climate change adaptation. Building relationships and connections among farmers through organized networking events, the implementation of risk mitigation strategies, and the promotion of financial literacy initiatives to bolster the capacities of smallholder farmers in the credit market are important factors that should be considered by policymakers and other stakeholders to enhance their adaptive capacity in the changing climate.

The The Twin Deficits Hypothesis: Revisiting the Link Between Budget Deficits and Trade Deficits in Tanzania

Enock Mwakalila, Rosemary Taylor — Sat, 28 Jun 2025 00:00:00 +0000

The Twin Deficit Hypothesis has been extensively examined across various economic contexts, yet its applicability often depends on a country’s unique economic structure and dynamics. This study revisits the hypothesis in Tanzania, analyzing the relationship between the budget and trade deficits using quarterly time series data from 2005 to 2023. Employing a Granger Causality test within a multivariate Vector Error Correction Model, this research explores the direction of causality between the two deficits. The findings confirm a significant short and long-run relationship between the budget and trade deficits. Specifically, the results reveal a unidirectional short-run causality from the trade deficit to the budget deficit, aligning with the Current Account Targeting Hypothesis perspective of the Twin Deficit Hypothesis. Policies for effective exchange rate management, export diversification, and reducing import dependency are thus essential. These measures will lower external borrowing needs, enhance fiscal resilience, and support sustainable economic growth.

A Revisit of the Causal Effect of Debt Burden on Inflation Dynamics in Tanzania

Cornel Joseph, Mirau N. Mbise — Sat, 28 Jun 2025 00:00:00 +0000

This research paper delves into the impact of national debt on inflation in Tanzania. It uses the autoregressive distributed lag model and the Granger causality approach, with quarterly data from 2003 to 2023. The findings show that total debt stock and public external debt have a negative effect on inflation in the long run. Meanwhile, long-term inflation is positively influenced by both private and public external debt. The study also reveals that national debt has a one-way causal relationship with inflation in Tanzania. These results suggest that the government should focus on managing public debt when making decisions to control inflationary pressure. However, if the government needs to fund a budget deficit, it should prefer external debt over domestic debt since it helps achieve the macroeconomic goal with a reduced risk of inflation.