Lommerud, K.E.; Sandvik, B.; Straume, O.R. - Institutt for Økonomi, Universitetet i Bergen - 2001
We analyse the question of optimal taxation in a dual economy, when the government is concerned about the distribution of labour incom. Income inequality is caused by the presence of sunk capital investments, which creates a 'good jobs' sector due to the capture of quasi-rents by trade unions.