Tanzania’s Road Upgrades: Economic Gains for Some, Hardships for Farmers

The study reveals that while road rehabilitation in Tanzania improved market access, it also intensified competition, leading to lower agricultural prices and reduced farm incomes. Smallholder farmers struggled to adapt, with many shifting to wage labor, highlighting the need for complementary policies to support rural livelihoods.

A study conducted by researchers from the University of Fribourg and UNICEF Innocenti – Global Office of Research and Foresight, critically examines the effects of road rehabilitation on rural livelihoods in Tanzania. While transport infrastructure is often viewed as a key driver of economic development, this research challenges the assumption that better roads always lead to better economic outcomes for local communities. The Tanzanian government undertook a large-scale road rehabilitation program, upgrading 2,500 km of major roads between 2008 and 2013, aiming to improve market access and reduce poverty. However, rather than uniformly boosting rural incomes, the study reveals a more complex reality: while transportation costs decreased, increased market competition from external producers negatively affected many small-scale farmers.

Tanzania’s economy heavily depends on agriculture, which employs nearly 74% of the labor force and contributes significantly to national GDP. Farmers, particularly smallholders, rely on staple crops like maize and rice for both subsistence and income. The road rehabilitation program, implemented under the National Roads Agency (TANROADS), sought to connect agricultural regions with larger markets, potentially increasing sales opportunities. The study employs rigorous empirical methods, including household fixed effects, propensity score matching, and difference-in-difference estimation, using data from LSMS-ISA surveys. By comparing households near upgraded roads with those near roads that were not rehabilitated, researchers were able to isolate the impact of improved transport links on economic well-being.

Lower Prices, Greater Competition, and Declining Farm Profits

One of the study's most striking findings is the decline in rice prices in areas affected by road rehabilitation. While lower prices generally benefit consumers, they create challenges for small-scale farmers who rely on selling their produce. Maize prices showed a less significant decline but followed a similar pattern. The study suggests that improved roads facilitated the entry of cheaper goods from other regions and neighboring countries, intensifying market competition. Instead of expanding their market reach, many local farmers found themselves struggling to maintain profitability.

As a response to falling prices, rural households adjusted their labor allocation. Many shifted away from agriculture and sought alternative sources of income through wage labor. However, while there was an increase in non-farm work, overall household incomes did not see a significant rise. The wage income earned was often insufficient to compensate for the decline in agricultural earnings. As a result, many farmers found themselves caught between rising competition and limited opportunities for financial growth. The shift from agriculture to wage labor raises concerns about long-term sustainability, especially if local job markets do not expand fast enough to absorb displaced agricultural workers.

Economic Stress and Asset Depletion

Beyond declining farm incomes, the study also finds evidence of broader economic stress among rural households. Despite the drop in rice prices, household consumption patterns did not change significantly, indicating that lower prices did not necessarily translate into greater food security. Instead, many households experienced financial strain, leading to a decline in asset ownership. Durable asset holdings, which include household goods and long-term investments, fell among those living near upgraded roads. This suggests that some families may have had to sell assets to cope with income losses.

Interestingly, the study does not find strong evidence of increased migration from rural to urban areas. Households remained in place but adapted their economic strategies to navigate the changing market conditions. Migration is often seen as a coping mechanism for economic shocks, but in this case, the data indicate that most households adjusted by reallocating labor rather than moving to cities. The absence of significant migration suggests that road rehabilitation primarily affected local market dynamics rather than triggering large-scale demographic shifts.

Winners and Losers: The Unequal Effects of Better Roads

The impact of road rehabilitation was not uniform across all households. Farmers who were net consumers of rice—those who bought more rice than they sold—benefited from lower prices. Conversely, net producers, particularly smallholder farmers, suffered income losses due to falling market prices. The effects were more pronounced in border regions, where competition from imported rice was particularly strong. This suggests that improved roads facilitated greater trade flows, but not necessarily in a way that favored local producers.

To ensure the robustness of their findings, researchers conducted several validation tests. Placebo tests on roads that were planned for rehabilitation but not yet upgraded showed no similar economic effects, reinforcing the credibility of the results. Historical data analysis confirmed that prior to 2008, there were no systematic economic differences between treated and control areas, indicating that the observed changes were directly linked to road improvements. Alternative definitions of treatment, such as proximity to newly connected cities, yielded weaker effects, suggesting that increased competition was more localized rather than driven by urban markets.

Rethinking Infrastructure Policy for Rural Development

The study concludes that while road rehabilitation improves connectivity, it does not necessarily translate into better economic conditions for all rural households. The findings highlight the need for complementary policies that support small-scale farmers in adapting to changing market conditions. Measures such as farmer cooperatives, agricultural subsidies, and investment in value-added production could help mitigate the negative effects of increased competition. Additionally, prioritizing the development of secondary and feeder roads—rather than just major highways—could provide more direct benefits to rural communities by improving local access to markets without exposing farmers to overwhelming external competition.

The long-term effects of road rehabilitation remain uncertain. While the short-term impact has been largely negative for smallholder farmers, there is a possibility that rural economies will eventually adjust. Farmers might shift toward higher-value crops, adopt more efficient farming techniques, or find new economic opportunities in non-agricultural sectors. However, there is also a risk that prolonged exposure to competition without adequate support mechanisms could lead to persistent economic distress among vulnerable rural populations.

The research challenges the simplistic view that better roads always lead to poverty reduction. Infrastructure development is undoubtedly important, but its impact on rural economies depends on how well local communities can leverage new opportunities while withstanding increased competition. Policymakers must adopt a more nuanced approach that balances economic growth with social equity, ensuring that infrastructure investments benefit not just urban markets and large-scale producers but also the smallholder farmers who form the backbone of rural economies. By acknowledging the complexities of rural development, governments can design more effective policies that truly enhance the well-being of their most vulnerable populations.