| Sumario: | A general equilibrium model is developed in which price changes are triggered by a tax reform and resource mobility is restricted. Removing a pretransition price distortion causes a recession in the short run, the size of which is shown to be proportional to the original distortion. Permitting intersectoral wage differences would moderate the recession but at a cost in long-term efficiency. An increase in government spending reduces total unemployment, but at a cost in long-term welfare, while intersectoral transfer through interenterprise debt makes the sectoral distribution of unemployment more equal but does not change total unemployment and may reduce welfare. J. Comp. Econ., September 2001, |Wb29[|WB](3), pp. 403–416. London School of Economics, London WC2A 2AE, United Kingdom. Copyright 2001 Academic Press.Journal of Economic Literature Classification Numbers: C13, E32, O11.
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