The Growth, Inequality, and Poverty Nexus: Lessons from Long-term Trends in Tanzania, 1961–2017

This paper analyses the growth-inequality-poverty nexus in Tanzania. We provide a unique long-term study covering six decades of Tanzanian independence and disentangle the competing narratives concerning growth, inequality, and poverty in the country. We do this by carefully assessing the existing–and at times contradictory–data on growth, inequality, and poverty and by introducing the inequality extraction ratio, which has so far received little attention in the development literature. Contrary to the popular belief that inequality is bad for growth, our analysis shows that the role of inequality in the development process is ambiguous. Observed levels of income inequality in developing country contexts are difficult to interpret and while income inequality in Tanzania was generally low, this was due limited inequality possibilities rooted in low levels of average incomes. Instead of relying on pre-determined assumptions concerning the interrelations between growth, inequality, and poverty, we point to the role of policy as the key element determining how these interrelations manifest.