affected by the presence of informality and how such distortions have an impact on aggregate variables. The authors in this … informality that is increasing with firm size: reducing informality entails a tradeoff because there are some distortions … show that, in general, reducing informality brings gains. In conclusion, substantial progress has been made in …

frictions model with informality, (ex post) heterogeneous workers, and conditional taxes and transfers. In the model, formal … informality is quite inelastic due to frictions, and due to the opposing forces of taxes and transfers. …