Informal Sector In Ethiopia

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In Ethiopia’s context, the informal sector/economy is the part of an economy that is not taxed and not examined by any form of government. The GDP/GNP of the country did not include all income generation activities of the informal sector unlike the formal sector, mainly due to the lack of information about the sector. It can be defined by different names such as a ancient market in labor other ideas which can be considered as informal sector can include the black market (shadow economy, underground economy). However, informal sector provides critical economic opportunities for the poor and has been growing rapidly since the 1960s. As such, integrating the informal economy into the formal sector is an important policy challenge in developing…show more content…
The key attraction of the silent informal economy is financial aspects. The activity allows employers, paid employees, and self-employed to increase their take-home earnings or reduce their costs by escaping taxation and social contributions. It is means of employment who cannot find a job in the formal sector. Definitions of informal sector, however, are different across the different schools of thought and have a lot of definitions given by the different researchers to get one definition of the informal sector because of heterogeneity of nature of the activity. However, it was widely defined as unregulated economic enterprises. According to Post (2007), urban unemployment, rural-urban migration and informal economy conventionally are substantial contribution for economic development since the 1960s. The declining agricultural products in LDCs and subsistence characterizes of agricultural sector which are the bases for migration of labor from rural to urban that is way the productivity of labor was increasing from industrial sector. In…show more content…
Among those features, the informal economy includes: ease of entry; small scale activity; self –employment; high percentage of family workers work within enterprises; low level of skills; little capital and obsolete equipments; low levels of education and training; low level of organization; no access to organized markets; no access to informal credit, cheap provision of goods and services, low productivity and low income. The ILO (2002a) report shows that in all LDCs, self–employment accounts for the leading proportion of non–agricultural informal employment than wage employment in informal jobs. The informal sector comprises of street vendors, domestic workers, home–based workers, construction workers, transport workers, waste pickers, etc. Street vendors and home based workers makeup the largest group of informal sector operators. While home–based workers are invisible but numerous type of street vendors are self-employed entrepreneurs (ILO, 2002b). In most of developing country including Ethiopia, street vendors form a significant part of urban livelihoods because it provides affordable goods and services with accessible retail choices to the poor section of the society in the LDC (ILO,

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