Efficiency in a search and matching economy with a competitive informal sector

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Charlot O., Malherbet F., Ulus M.

ECONOMICS LETTERS, vol.118, no.1, pp.192-194, 2013 (SSCI) identifier identifier

  • Publication Type: Article / Article
  • Volume: 118 Issue: 1
  • Publication Date: 2013
  • Doi Number: 10.1016/j.econlet.2012.10.017
  • Journal Name: ECONOMICS LETTERS
  • Journal Indexes: Social Sciences Citation Index (SSCI), Scopus
  • Page Numbers: pp.192-194
  • Keywords: Search and matching models, Informality, Efficiency, DEVELOPING-COUNTRIES
  • Galatasaray University Affiliated: Yes

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. (C) 2012 Elsevier B.V. All rights reserved.