Disparities in Prices and Income across German NUTS 3 Regions

Reinhold Kosfeld (), Hans-Friedrich Eckey and Jørgen Lauridsen

Applied Economics Quarterly (formerly: Konjunkturpolitik), 2008, vol. 54, issue 2, 123-141

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.

Keywords: Regional price level; econometric price models; price disparities; real income disparities (search for similar items in EconPapers)
JEL-codes: C21 R13 R31 (search for similar items in EconPapers)
Date: 2008
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