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A simple model of the transformational recession under a limited mobility constraint

Gomulka, Stanislaw and Lane, John (2000) A simple model of the transformational recession under a limited mobility constraint. CEPDP (466). Centre for Economic Performance, London School of Economics and Political Science, London, UK. ISBN 075301405X

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Abstract

This paper considers the impact on sectoral outputs and employments of rapid and large changes in relative prices, such as those which occurred in transition economies during the 1990s. A simple general equilibrium model is developed in which price changes are induced by a tax reform and resource mobility is restricted. The reform is designed to improve the quality of the price system, but is shown to cause a recession the size of which is proportional to the initial tax distortion. It is also demonstrated that a wage flexibility would moderate the magnitude of the recession, but this gain would be obtained at a cost in longer term efficiency, and would be, in any case, unsustainable.

Item Type: Monograph (Discussion Paper)
Official URL: http://cep.lse.ac.uk
Additional Information: © 2000 the authors
Divisions: Centre for Economic Performance
Economics
Subjects: H Social Sciences > HB Economic Theory
Sets: Collections > Economists Online
Research centres and groups > Centre for Economic Performance (CEP)
Departments > Economics
Date Deposited: 30 Jul 2008 13:30
Last Modified: 18 May 2020 23:30
URI: http://eprints.lse.ac.uk/id/eprint/20171

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