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Disparities in Prices and Income across German NUTS 3 Regions
Kosfeld, Reinhold | Eckey, Hans-Friedrich | Lauridsen, Jorgen
Applied Economics Quarterly, Vol. 54 (2008), Iss. 2 : pp. 123–141
13 Citations (CrossRef)
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1University of Kassel, Institute of Economics, D-34109 Kassel.
2University of Kassel, Institute of Economics, D-34109 Kassel.
3University of Southern Denmark, Institute of Public Health, Campusvej 55, DK-5230 Odense M.
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Abstract
In EU countries, knowledge on spatial disparities in overall price level is extremely scarce. When interregional price disparities are large, however, nominal income measures fail to assess prosperity and the catch-up processes of regions. Despite its importance for regional policy, no official regional price statistic is available as a standard. On account of this gap, this paper deals with the econometric estimation of regional price indices for German NUTS 3 regions. Econometric price models for the consumer price index (CPI) and the housing rent index (HRI) are developed on the ground of utility maximization in a two-goods model. The estimated price indices are used to analyse price disparities in the period 1995–2004 across German NUTS 3 regions. Real income comparisons show that the East /West gap is likely to be substantially larger than assessed from incomplete price data in previous studies.