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Efficiency in a Search and Matching Economy with a Competitive Informal Sector

Olivier Charlot, Franck Malherbet () and Mustafa Ulus ()

No 6935, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We consider a dual labor market with a frictional formal sector and a competitive informal sector. We show that the size of the informal sector is generally too large compared to the optimal allocation of the workers. It follows that our results give a rationale to informality-reducing policies.

Keywords: search and matching models; informality; efficiency (search for similar items in EconPapers)
JEL-codes: E24 E26 J60 L16 O1 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge, nep-iue and nep-mac
Date: 2012-10
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Published in: Economic Letters, 2013, 118(1), 192-194

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