Rural Nonfarm Enterprises in Tanzania’s Economic Transformation
The chapter explores the nature of rural nonfarm activities to better understand their contribution to the economic development and diversification of rural areas or rural transformation. Numerous data sources are used to demonstrate rural household participation in the nonfarm economy. They also reveal heterogeneity in firm productivity by sector. Using a probit analysis, we identify the characteristics of firms that make them more likely to fall into a category of ‘high potential’ firms in order to better understand the correlates of enterprise success in rural areas. We found the following for rural businesses: (i) those owned by females are less productive; (ii) businesses that operate full-time are more productive; (iii) businesses operated by owners who live in households that are not poor are more productive; (iv) owners who see their businesses as growing are more productive; and (v) businesses with more customers and regional (vs local) customers are more productive.