Charlot, Olivier; Malherbet, Franck; Ulus, Mustafa - In: Economics Letters 118 (2013) 1, pp. 192-194
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.