Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/203929 
Year of Publication: 
2010
Series/Report no.: 
wiiw Working Paper No. 64
Publisher: 
The Vienna Institute for International Economic Studies (wiiw), Vienna
Abstract: 
Relative to consumer services, consumer goods tend to be cheaper in richer European countries. This tendency, customarily explained in terms of cost developments and/or foreign-trade considerations, can be a reflection of a demand-side regularity. An econometrically specified cross-country demand system indicates that goods are 'necessities' while services are 'luxuries'. Relative price of goods responds negatively to the rising supply of goods and positively to the rising supply of services, with the former response being much stronger. If the supply of both items were to rise at the same speed, the relative price of goods would have to fall.
Subjects: 
relative prices
Balassa-Samuelson Effect
Engel Law
Almost Ideal Demand System
international consumption comparisons
structural change
JEL: 
O14
D12
D51
Document Type: 
Working Paper

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