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We analyse the question of optimal taxation in a dual economy, when the government 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 unions....
Persistent link: https://www.econbiz.de/10010315853
There still seems to be some confusion about the consequences of normalisations in the optimal taxation literature. We claim that:1) Normalisations do not matter for the real solution of optimal taxation problem.2) Normalisations do matter for good characterisations of the solutions to optimal...
Persistent link: https://www.econbiz.de/10010315873