Living in Madrid is 43% more expensive than in Extremadura

Study shows that factoring in cost of living reduces income differences across the regions

The Paseo de la Concha in San Sebastián is the most expensive street in Spain.
The Paseo de la Concha in San Sebastián is the most expensive street in Spain.JAVIER HERNÁNDEZ

Living in Spain’s most expensive region, Madrid, costs 43% more than in its cheapest, Extremadura, according to a study presented by Jaume García, former head of the National Statistics Institute and now a professor at Catalonia’s Pompeu Fabra University.

What’s more, the study, which was commissioned by the Catalan regional government, shows that taking the cost of living into account reduces the disparities in income among the regions.

Without applying any kind of correction, the Basque Country is the Spanish region with the highest GDP per inhabitant (€30,051), while Extremadura has the lowest (€15,133) – a difference of 98%, almost double.

Once GDP per capita figures are adjusted according to the cost of living, the difference between the top and bottom regions drops from 98% to 54%, the report finds

After taking the cost of living into account, the Basque Country remains the region with the highest per capita income (€27,895), but Andalusia moves into last place with €18,058. At the same time, the difference between the top and bottom regions drops from 98% to 54%, according to the report.

The study uses data from 2012 to calculate the purchasing power parity (PPP) of Spain’s different regions – a measure that allows the analysis of an economy’s level of production or wellbeing, cost of living, and poverty while leaving out such factors as variations in prices.

According to the report, the aim of calculating purchasing power parity is to allow the different levels of government to better distribute resources across the country. One of the parameters they use to do this is per capita GDP, which prompted the authors of the report to calculate the impact that the cost of living has on this measure.

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The results show that per capita GDP figures are gradually moving towards the Spanish average of €22,297 across the regions once PPP is taken into account. The authors would like to see the measure adopted as an official statistic.

On the other hand, the report points out that the ranking of the different regions does not vary “substantially” as a result of correcting the GDP figures. The most significant changes, according to the survey, are the rises of the Canary Islands, which moves from 13th to 10th place, and La Rioja, which goes up from fifth to second, and the drops of Catalonia – down from fourth to seventh place – and Madrid, which falls from second to fifth.

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