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

  • Charlot, Olivier

    ()

    (University of Cergy-Pontoise)

  • Malherbet, Franck

    ()

    (University of Rouen)

  • Ulus, Mustafa

    ()

    (Galatasaray University)

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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File URL: http://ftp.iza.org/dp6935.pdf
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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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References listed on IDEAS
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  1. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, June.
  2. James Albrecht & Lucas Navarro & Susan Vroman, 2009. "Efficiency in a Search and Matching Model with Endogenous Participation," ILADES-Georgetown University Working Papers inv218, Ilades-Georgetown University, Universidad Alberto Hurtado/School of Economics and Bussines.
  3. Zenou, Yves, 2008. "Job search and mobility in developing countries. Theory and policy implications," Journal of Development Economics, Elsevier, vol. 86(2), pages 336-355, June.
  4. Fields, Gary S., 2011. "Labor market analysis for developing countries," Labour Economics, Elsevier, vol. 18(S1), pages S16-S22.
  5. Hosios, Arthur J, 1990. "On the Efficiency of Matching and Related Models of Search and Unemployment," Review of Economic Studies, Wiley Blackwell, vol. 57(2), pages 279-98, April.
  6. Acemoglu, Daron, 2001. "Good Jobs versus Bad Jobs," Journal of Labor Economics, University of Chicago Press, vol. 19(1), pages 1-21, January.
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