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

9 Pages Posted: 20 Oct 2012

See all articles by Olivier Charlot

Olivier Charlot

University of Cergy-Pontoise

Franck Malherbet

University of Cergy-Pontoise - THEMA; IZA Institute of Labor Economics

Mustafa Ulus

Galatasaray University

Date Written: October 20, 2012

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

JEL Classification: E24, E26, J60, L16, O1

Suggested Citation

Charlot, Olivier and Malherbet, Franck and Ulus, Mustafa, Efficiency in a Search and Matching Economy with a Competitive Informal Sector (October 20, 2012). IZA Discussion Paper No. 6935, Available at SSRN: https://ssrn.com/abstract=2164664 or http://dx.doi.org/10.2139/ssrn.2164664

Olivier Charlot (Contact Author)

University of Cergy-Pontoise ( email )

33 Boulevard du Port
Cergy-Pontoise Cedex, Cedex 95011
France

Franck Malherbet

University of Cergy-Pontoise - THEMA ( email )

33 boulevard du port
F-95011 Cergy-Pontoise Cedex, 95011
France

IZA Institute of Labor Economics

Schaumburg-Lippe-Str. 7 / 9
Bonn, D-53072
Germany

Mustafa Ulus

Galatasaray University ( email )

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