Variation in Staple Food Prices in Tanzania

A Case of Dar es Salaam and Dodoma Rice Wholesale Markets.

Abstract

This paper examined the spatial price variations for staple food between the two major consumer rice markets of Dodoma and Dar es Salaam and extent of price transmission. This follows the dearth in information regarding the extent of price variation in local markets and how these variations are transmitted from one market to another. The Error Correction Model was used in analyzing both the short and long run price relationship between the two markets using time series data on monthly wholesale prices for rice from 2004 to 2015. However, the Augmented Dickey Fuller and Phillip-Perron tests were employed in testing the unit root problem while Johannes test was used to test the co-integration of the two markets. Findings indicate that, rice price trends varied between the two markets whereby prices fluctuates more in Dodoma as compared to that at the Dar es Salaam market.  Moreover, Dodoma market was found to be linked to Dar es Salaam markets with price elasticity of transmission of 0.37. This suggests that, about 37% of the changes in prices at Dar es Salaam markets are transmitted to Dodoma market.  Therefore, it is concluded that, there is a significant weak relationship between the rice prices in Dodoma and those in Dar es Salaam. The study recommend that, government and other stakeholder should formulate policies and strategies that could improve the market access in Dodoma through improving roads and markets infrastructures so as to reduce price variability between producers and wholesale markets in the region and over the country.