We demonstrate how the presence of an untaxed informal sector can sharply lower the cost of environmental and energy tax policy. The mechanism involves substitution between formal and informal labor supply: energy or environmental taxes can improve the efficiency of the tax system by drawing activity into the formal sector.

Accelerating economic growth and poverty reduction are and continue to be the critical policy challenges in Ethiopia. The sluggish growth in agriculture coupled with lack of broad-based economic growth raises debates over the relevant direction and emphasis of development interventions in the country.

The sluggish growth in agriculture coupled with lack of broad-based economic growth raises debates over the relevant direction and emphasis of development interventions in the country.