Study on the purchasing power parities (PPP) of the Spanish Autonomous Communities

EU regulation 1445/2007 recommends member states calculate the purchasing power parities (PPP) of their regions, as this variable is key to designing suitable policies for regional cohesion. Despite this, the Spanish Government has never calculated this variable and therefore in Spain there is no official study analysing the cost of living in the regions.

Resultat de les estimacions de paritats de poder adquisitiu

Source: Ministry of Economy and Knowledge

It is for this reason that the Government of the Generalitat commissioned the study Estimation of purchasing power parities for the Spanish Autonomous Communities to a team formed by the researchers Jaume García (professor of Applied Economics of the UPF), Josep Lluís Raymond (professor of the Fundamentals of Economic Analysis of the UAB), Àlex Costa (technical staff of the Barcelona City Council) and Xavier López (technical staff of the Generalitat of Catalonia).

The study estimates the purchasing power parities based on three indirect calculation methods based respectively on the relative CPIs (Consumer Price Index), on the GDP based models of the territories and on a Household Consumer Expenditures model. The researchers were unable to apply a similar methodology to that used by Eurostat, as only the Spanish National Statistics Institute (INE) possesses the necessary base information for these calculations.

The study shows differences of up to 34 points between the purchasing power in the different Autonomous Communities. It provides a price index for Catalonia of 108.5 with respect to the state average, the highest after Madrid (114.5) and Navarre (110.6), while the Autonomous Communities of Extremadura (80.3), Canary Islands (83.1) and Castile-La Mancha (84.8) are positioned at the opposite end.

This document is accompanied by an annex which shows the application of purchasing power parities to the autonomic financing system.

Last update:  September 2015