Tanzania’s Revealed Comparative Advantage and Structural Transformation

Abstract

This study examines Tanzania’s structural transformation by using the revealed comparative approach using export data for 2001, 2002 and 2011, at the second level of the Harmonised System (HS). Using global data, the study finds that for 2002 and 2011, agricultural products, fish and minerals have comparative advantage over other product groups. For the periods 2001 and 2011 for which Tanzanian data is used, these results are further corroborated; agricultural products dominate Tanzania’s  comparative advantage for both years, although minerals assume the first rank in 2011. Specifically, 70% of the product groups are agricultural, with
the rest being mineral products. These findings suggest that no structural transformation has occurred in the Tanzanian economy over the last decade, and this is supported by the Spearman’s Rank Correlation  coefficient calculated using the country data. The policy implication is that since Tanzania reveals strong comparative advantage in agriculture and
mineral products, it is important to add value to these products for higher export earnings. This means ensuring that products from agriculture,  mining and fishery sectors are locally processed to meet international  standards. Local processing will also ensure that the much needed jobs are created in the country.

Key words: Comparative advantage; revealed comparative advantage, Tanzania, structural transformation