Lommerud, Kjell Erik; Sandvik, Bjørn; Straume, Odd Rune - In: Scandinavian Journal of Economics 106 (2004) 4, pp. 703-720
We analyse the question of optimal taxation in a dual economy, when the policy-maker is concerned about the distribution of labour income. 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...