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

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  • Charlot, Olivier

    ()
    (University of Cergy-Pontoise)

  • Malherbet, Franck

    ()
    (University of Rouen)

  • Ulus, Mustafa

    ()
    (Galatasaray University)

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.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 6935.

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Length: 9 pages
Date of creation: Oct 2012
Date of revision:
Publication status: published in: Economic Letters, 2013, 118(1), 192-194
Handle: RePEc:iza:izadps:dp6935

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Keywords: search and matching models; informality; efficiency;

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  1. Albrecht, James & Navarro, Lucas & Vroman, Susan, 2010. "Efficiency in a search and matching model with endogenous participation," Economics Letters, Elsevier, Elsevier, vol. 106(1), pages 48-50, January.
  2. Hosios, Arthur J, 1990. "On the Efficiency of Matching and Related Models of Search and Unemployment," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 57(2), pages 279-98, April.
  3. Fields, Gary S., 2011. "Labor market analysis for developing countries," Labour Economics, Elsevier, Elsevier, vol. 18(S1), pages S16-S22.
  4. Zenou, Yves, 2008. "Job search and mobility in developing countries. Theory and policy implications," Journal of Development Economics, Elsevier, Elsevier, vol. 86(2), pages 336-355, June.
  5. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, December.
  6. Acemoglu, Daron, 2001. "Good Jobs versus Bad Jobs," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 19(1), pages 1-21, January.
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