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Good Jobs, Bad Jobs and Redistribution

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  • Lommerud, Kjell Erik
  • Sandvik, B.
  • Straume, Odd Rune

Abstract

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 unions. With strong unions and high planner preference for income equality the optimal policy is a combination of investment subsidies and progressive income taxation. If unions are weaker, the policy-maker may instead choose to tax investment.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 4115.

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Date of creation: Nov 2003
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Handle: RePEc:cpr:ceprdp:4115

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Keywords: optimal taxation; redistribution; rent sharing; segmented labour markets;

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Citations

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Cited by:
  1. Belan, Pascal & Carré, Martine & Gregoir, Stéphane, 2010. "Subsidizing low-skilled jobs in a dual labor market," Labour Economics, Elsevier, vol. 17(5), pages 776-788, October.
  2. Merkl, Christian & Snower, Dennis J., 2008. "Escaping the Unemployment Trap: The Case of East Germany," IZA Discussion Papers 3681, Institute for the Study of Labor (IZA).
  3. Mireia Valverde & Gerard Ryan & María Gorjup, 2007. "An Examination of the Quality of Jobs in the Call Center Industry," International Advances in Economic Research, Springer, vol. 13(2), pages 146-156, May.
  4. Christian Merkl & Dennis J. Snower, 2007. "Escaping the Unemployment Trap � The Case of East Germany," Kiel Working Papers 1309, Kiel Institute for the World Economy.
  5. Jörg Lingens & Klaus Wälde, 2007. "Pareto-Improving Unemployment Policies," Working Papers 2007_34, Business School - Economics, University of Glasgow.
  6. Marco de Pinto, 2012. "The Redistribution of Trade Gains and the Equity-Efficiency Trade-Off," IAAEU Discussion Papers 201206, Institute of Labour Law and Industrial Relations in the European Union (IAAEU).
  7. Silvia Rocha-Akis, 2012. "The Pain and Gain of Offshoring: The Effects of Tax Progression in a Segmented Labour Market," CESifo Working Paper Series 3739, CESifo Group Munich.
  8. Kessing, Sebastian G. & Konrad, Kai A., 2006. "Union strategy and optimal direct taxation," Journal of Public Economics, Elsevier, vol. 90(1-2), pages 393-402, January.

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