Analysing the effects of price changes on the cost of living of consumers using true indices

In this paper we analyse the effects of price changes on consumers' cost of living, using true indices for Germany, France, the UK, Spain and Sweden. We define these indices for a PIGLOG cost function and a dynamic specification of the LAIDS allows us to estimate them using aggregated time-series from 1964 to 1993. The calculated index numbers show that: (i) Spain presents the highest values for all groups, whereas the lowest appear in Germany and the UK, (ii) the highest values were in both oil crisis years, 1973 and 1979, whereas the lowest were generally in 1966 and in 1993, and (iii) the mean values reveal that Spain and France display the highest true cost-of-living indices, whereas Germany and the UK show the lowest.