Efficiency in a Search and Matching Economy with a Competitive Informal Sector
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.
|Date of creation:||Oct 2012|
|Date of revision:|
|Publication status:||published in: Economic Letters, 2013, 118(1), 192-194|
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