ARE SERVICES INCOME‐ELASTIC? SOME NEW EVIDENCE
- 1 September 1996
- journal article
- Published by Wiley in Review of Income and Wealth
- Vol. 42 (3) , 257-269
- https://doi.org/10.1111/j.1475-4991.1996.tb00182.x
Abstract
The hypothesis that the demand for services is income‐elastic tended to find support in early empirical work. Recent studies however, adopting improved methodologies and better international data (based on PPP exchange rates), have challenged this conventional wisdom. Using an updated, disaggregated dataset covering 60 countries in 1980 this paper re‐estimates income and price elasticities of demand for services. It rejects the income‐elastic argument overall but confirms a wide range of income elasticity estimates (above and below unity) across different types of services. Estimates are also shown to be sensitive to thea priorimodel of service demand.Keywords
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