Economic Effects of Cross-Border Purchases in Austria

Cross-border purchases are a normal feature of market economies. The magnitude of these purchases depends on economic factors (such as price differentials), administrative factors (such as import quotas), and on a variety of other factors (such as geographic constellations). Within the EU the largest cross-border purchases occurred between Germany and its neighbors, Luxembourg and its neighbors, as well as between the Republic of Ireland and Northern Ireland. The completion of the Single Market brought about a short-term boom in cross-border purchases. In the medium and long term, however, cross-border shopping will lose in importance. In Austria, consumer purchases abroad have risen continuously since 1990, at a rate exceeding the growth rate of income and total consumer expenditures. In 1995, the year of Austria's accession to the EU and of the devaluation of the lira, cross-border purchases amounted to ATS 31 billion. As a result, 10,800 jobs disappeared, output was 1 percent lower, and the public sector lost ATS 3.6 billion in tax revenues; but, as the WIFO study points out, cross-border purchases are foremost a problem specific to certain border regions and certain economic sectors.