Employment and Productivity Growth in Tanzania’s Service Sector

Abstract

Despite Tanzania's rapid recent growth, the vast majority of employment creation has been in informal services. This paper addresses the role that different subsectors of formal and informal services have played in Tanzania's growth. It finds that subsectors such as trade services contribute significantly to employment despite their relatively low productivity, while subsectors such as business and transportation services display higher productivity and improve the environment for other firms to operate. The paper also acknowledges the role of high-performing small and medium-sized service firms and the tourism sector in contributing further to Tanzania's growth and structural change.

Sectoral Growth Patterns and Unemployment in Uganda

“…Empirically, several influential studies link sectoral growth to labour market performance which motivates our work. This literature follows broadly three strands: (1) the impact of structural transformation on unemployment and poverty (Arias-Vazquez et al, 2021;Basile et al, 2011;Christiaensen & Kaminski, 2015;Lilien, 1982;Loayza & Raddatz, 2006;Ravallion & Chen, 2004;Ravallion & Datt, 1996Suryahadi et al, 2008) , (2) sector-specific growth, poverty, and unemployment (Alvarez-Cuadrado & Poschke, 2011;Christiaensen et al, 2010;de Janvry & Sadoulet, 2009;Ellis et al, 2018), and (3) natural resources, poverty and unemployment (i.e., natural resource curse) (Caselli & Michaels, 2009;Mcmillan & Rodrik, 2011). According to Christiaensen & Kaminski, (2015), sector growth can contribute to employment and thus low poverty or unemployment through two channels first through within-sectoral economic growth where assets such as labour and land change (Ravallion & Datt, 1996), and second through inter-sectoral factor mobility from low to high productivity sectors (Mcmillan & Rodrik, 2011), and more recently which Arias-Vazquez et al ( 2021) calls structural transformation.…”

Implications for Public Policy

“…In Mozambique, for example, business regulations-and the opportunities for corruption engendered by the regulatory regime-increase firms' costs and reduce competitiveness (World Bank 2009).17 In Uganda, senior managers of manufacturing firms spend on average more than thirteen days a year dealing with government officials, and 40 per cent of the manufacturing firms surveyed complained that regulations were not interpreted consistently (Henstridge and Page 2012). In Tanzania, tour operators and other tourism service providers face a plethora of regulations and taxes (Ellis et al 2016). Tour operators pay a minimum of twenty-nine taxes, levies, and fees, mostly to the central government.…”

Éditorial

“…Ce secteur se caractérise par des services commerciaux à faible valeur ajoutée et un niveau élevé d'informalité (CEA, 2018). D'après des données récentes sur la Tanzanie, la productivité des services commerciaux reste 3.5 fois supérieure à celle du secteur agricole (Ellis, McMillan et Silver, 2017). Au Rwanda et en Ouganda, les industries de service représentent respectivement 21 et 17 des 30 premières industries en termes de productivité du travail (Newfarmer, Page et Tarp, 2018).…”