of education and tax policies in the presence of a large informal sector. I develop an overlapping-generation life … choose to operate either in the formal or in the informal sector given that the education premium is higher in the former … subsidies on the overall economy. The increase in the education subsidy improves educational attainment, expands formalization …

and semi-parametric techniques, we test two hypothesis regarding formal and informal labor markets: whether there is a … wage gap between formal and informal workers and whether this gap is sensitive to variations in unemployment rates across … compulsory Social Security System. In line with most studies, the formal workers earn more than informal workers, as suggested by …