Living Large in the Countryside: Saxony's Rural Districts Outshine Cities in Purchasing Power
Contrary to popular belief, Saxony's urban centers don't hold the crown when it comes to purchasing power. A recent analysis conducted by the Institute of the German Economy (IW) reveals that rural districts surpass their city counterparts when income is factored against the regional cost of living.
The Leipzig district leads the pack in Saxony, boasting a disposable income of 25,537 euros. Hot on its heels are Zwickau (24,984 euros) and Meißen (24,831 euros). As for the city big-hitters, Leipzig (EUR 21,319) and Dresden (EUR 22,133) sit near the bottom of the rankings. Meanwhile, the district of Starnberg in Bavaria claims Germany's highest disposable income at 32,831 euros—a stark contrast to Gelsenkirchen's 18,886 euros at the bottom.
This purchasing power ranking is based on a regional price index and income statistics, both gathered in 2022 and 2021 respectively by the IW and the Federal Statistical Office. The index takes into account price variations, while the income figures account for the differences between urban and rural expenditures.
Long story short, consumers in rural districts with high purchasing power can benefit from lower prices, whilst residents in more urban areas like Leipzig and Dresden may discover the price chasm harder to bridge despite higher income levels.
Source: dpa.com
Enrichment Insights:
While rural districts have higher purchasing power levels than urban centers in Saxony, we can look to multiple factors that input into the broader regional economic disparities found across Germany. These factors might influence the growth of purchasing power in certain areas:
- Regional Economic Disparities: Germany's OECD report on "Regions and Cities at a Glance 2018" shows that the economic disparities between different German regions exceed the median levels found in OECD countries. Multiple factors, such as average GDP per capita and employment rates, contribute to these disparities [4].
- Subnational Government Investments: Investments made by local governments have a significant impact on regions' economic performances. Ultimately, these government investments account for about 70% of total public investment in Germany, but still fall below the average of OECD countries [4].
- Productivity Trends: The OECD report also highlights that productivity trends vary across regions, with top-performing cities like Hamburg and underperforming regions like Thuringia. These productivity disparities contribute to the overall economic performance of various locations [4].
- Labor Market Factors: Labor market conditions, such as individual wage bargaining, play a role in regional income disparities. However, the NBER working paper "Bargaining and Inequality in the Labor Market" concludes that wage inequality can have a significant impact on earnings, but does not address regional purchasing power disparities [3].
- Regional Policies: Specific initiatives, like targeted investments and subsidies, can go a long way in supporting rural regions and enhancing their purchasing power levels. Yet, without more detailed regional economic analyses, it is challenging to assess the true impact of such policies.
