Global Gold Markets and the Poor: Preconditions for Sustained Poverty Alleviation trough Investment in the Natural Resource Sector in Tanzania

With the concept of scarcity being the central axiom on which economic theory is build, one would be inclined to think that being well endowed with something is an advantage for economic growth. Although developing countries often have considerable endowments of natural resources, this has not guaranteed fast economic growth: Empirical cross-country data suggest that countries well endowed with natural resources tend grow slower that countries with little natural wealth. Indeed, one can easily find examples of countries rich in resource endowments trapped in poverty, as opposed to countries without resources enjoying high growth rates. Does this mean developing countries would better leave their resources unexploited?

For Tanzania, the above-mentioned, unresolved question will become very important in the immediate future. In the wake of globalisation and the government's successful efforts to attract foreign direct investment to exploit the natural resources on a large scale, Tanzania may enjoy a natural resource boom.

This research project seeks to identify the preconditions for poverty reduction through natural resource exploitation. First, a closer look will be taken at the macro-economic implications of a natural resources boom, especially the case of gold exploitation. Then, in a second step, we will analyse the impact of mining on poverty reduction at the micro-level, addressing the question of small-scale versus large-scale mining. In a third step, the macro- and micro- level research will be combined, resulting in policy recommendations for Tanzanian policy makers.