Archive:Household accounts at regional level
- Data from March 2008, most recent data: Further Eurostat information, Main tables and Database.
One of the primary aims of regional statistics is to measure the wealth of regions. This is of particular relevance as a basis for policy measures which aim to provide support for less well-off regions.
The indicator most frequently used to measure the wealth of a region is regional gross domestic product (GDP). GDP is usually expressed in Purchasing power standard (PPS) per inhabitant to make the data comparable between regions of differing size and purchasing power.
GDP is the total value of goods and services produced in a region by the persons employed in that region, minus the necessary inputs. However, owing to a multitude of interregional flows and State interventions, the GDP generated in a given region does not tally with the income actually available to the inhabitants of the region.
Main statistical findings
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Private household income
In market economies with State redistribution mechanisms, a distinction is made between two stages of income distribution.
The primary distribution of income shows the income of private households generated directly from market transactions, i.e. the purchase and sale of factors of production and goods. These include in particular the compensation of employees, i.e. income from the sale of labour as a factor of production. Private households can also receive income on assets, particularly interest, dividends and rents. Then there is also income from operating surplus and self-employment. Interest and rents payable are recorded as negative items for households in the initial distribution stage. The balance of all these transactions is known as the primary income of private households.
Primary income is the point of departure for the secondary distribution of income, which means the State redistribution mechanism. All social benefits and transfers other than in kind (monetary transfers) are now added to primary income. From their income, households have to pay taxes on income and wealth, pay their social contributions and effect transfers. The balance remaining after these transactions have been carried out is called the disposable income of private households.
For an analysis of household income, a decision must first be made about the unit in which data are to be expressed if comparisons between regions are to be meaningful.
For the purposes of making comparisons between regions, regional GDP is generally expressed in purchasing power standards (PPS) so that meaningful volume comparisons can be made. The same process should therefore be applied to the income parameters of private households. These are therefore converted with specific purchasing power standards for final consumption expenditure called PPCSs (purchasing power consumption standards).
Results for 2005
Primary income
Map 1 gives an overview of primary income in the NUTS 2 regions of the 23 countries examined here. Centres of wealth are clearly evident in southern England, Paris, northern Italy, Austria, Madrid and north-eastern Spain, Flanders, the western Netherlands, Stockholm, Nordrhein– Westfalen, Hessen, Baden-Württemberg and Bayern. The north–south divide in Italy and the west–east divide in Germany are clear to see, while the regional distribution in France is rela-tively homogeneous. A south–north divide can also be seen in the United Kingdom, albeit to a lesser extent than in Italy and Germany.
In the new Member States, it is mainly the capital regions that have relatively high income levels, particularly Prague, Bratislava, Közép-Magyarország (Budapest) Mazowieckie (Warsaw) and Bucureşti — Ilfov. The primary income of households is over half the EU average in two other Hungarian regions, all the other Czech regions and Slovenia, while in all the other regions of the new Member States it is below that level. The regional values range from 2 882 PPCS per inhabitant in north-eastern Romania to 29 392 PPCS in the UK region of Inner London. The 10 regions with the highest income per inhabitant include four regions each in the UK and Germany and one each in France and Belgium. This clear concentration of regions with the highest incomes in the United Kingdom and Germany is also evident when the ranking is extended to the top 30 regions: This group contains 11 German and six UK regions, along with five in Austria, three in Belgium, two in the Netherlands and one each in France, Italy and Sweden.
It is no surprise that the 30 regions at the tail end of the ranking are all located in the new Member States; the list contains 15 of the 16 Polish regions, seven of the eight Romanian regions, four regions in Hungary and two in Slovakia, together with Estonia and Latvia.
In 2005, the highest and lowest primary incomes in the EU regions differed by a factor of 10.2. Five years earlier, in 2000, this factor had been 11.8. There was therefore measurable convergence between the opposite ends of this distribution over the period 2000–05.
Disposable income
A comparison of primary income with Disposable income(Map 2) shows the levelling influence of State intervention. This particularly increases the relative income level in some regions of Italy and Spain, in the west and north of the United Kingdom and in parts of eastern Germany and Greece. Similar effects can be observed in the new Member States, particularly in Hungary, Slovakia and Poland. However, the levelling out of private income levels in the new Member States is generally less pronounced than in those of the EU-15.
In spite of State redistribution and other transfers, most capital regions maintain their prominent position with the highest disposable income for the country in question.
Of the 10 regions with the highest disposable income per inhabitant, five are in the United Kingdom, four in Germany, and one in France. The region with the highest disposable income in the new Member States is Közép-Magyarország (Budapest) with 11 283 PPCS per inhabitant, followed by the Prague region with 10 916 PPCS.
If the ranking is extended to the top 30 regions, the dominance of German, Austrian and UK regions is clear: the list contains seven regions each in the United Kingdom and Austria and 14 in Germany, together with one region each in Belgium and France.
The lower end of the distribution is very similar to the ranking for primary income. The bottom 30 include 13 Polish and seven Romanian regions, four in Hungary and three in Slovakia, together with the three Baltic States.
The regional values range from 3 146 PPCS per inhabitant in north-east Romania to 22 103 PPCS in Hamburg. State activity significantly reduces the difference between the highest and lowest regional values in the 23 countries dealt with here from a factor of around 10.2 to 7.0.
As with primary income, there is a clear trend in disposable income towards a narrowing of the spread in regional values: between 2000 and 2005 the difference between the highest and lowest values fell from a factor of 9.0 to 7.0.
It can thus be concluded overall that there was measurable regional convergence between 2000 and 2005 both in the primary income generated from market transactions and in the disposable income affected by State intervention.
The regional spread in disposable income within the individual countries is naturally much lower than for the EU as a whole, but varies considerably from one country to another. Graph 4.1 gives an overview of the spread of disposable income per inhabitant between the regions with the highest and the lowest values for each country. It can be seen that, with a factor of 2.3, the regional disparity is greatest in Romania. That means that the disposable income per inhabitant in the region of Bucureşti — Ilfov is more than twice as high as in north-east Romania. Apart from Romania, only Greece and Hungary have regional spreads with a factor of more than 2. With factors of around 1.9, Italy and Slovakia also have large regional variations. For Spain, Poland and Germany the highest value is about two thirds higher than the respective lowest value.
Of the new Member States, the Czech Republic, with 51 %, has the smallest spread between the highest and lowest values and is thus very close to Portugal, France and the United Kingdom. The smallest regional income disparities are to be found in Austria, Ireland, the Netherlands and Sweden, where the maximum values exceed the minimum values by between 10 % and 28 %.
Graph 1 also shows that the capital cities of 12 of the 18 countries with more than one NUTS 2 region also have the highest income values. This group includes all the larger new Member States. The economic dominance of the capital regions is also evident when their income values are compared with the national averages.
In four countries (Romania, Slovakia, Hungary and the Czech Republic), the capital cities exceed the national values by more than a third. Only in Belgium, Germany and Italy are the values lower than the national average.
To assess the economic situation in individual regions, it is important to know not just the levels of primary and disposable income but also their relationship to each other. Map 3 shows this quotient, which gives an idea of the effects of State activity and of other transfer payments. On average in the EU-27 disposable income amounts to 87.1 % of primary income. In 2000 this figure had been 85.8 %, so over this five-year period the scale of State intervention and other transfers decreased slightly. In general the EU-15 Member States have lower values than the new Member States.
On closer inspection, substantial differences can be seen between the regions of the Member States. Disposable income in the capital cities and other prosperous regions of the EU-15 is generally less than 80 % of primary income. Correspondingly higher percentages can be observed in the less affluent areas, in particular on the southern periphery of the EU, in the west of the UK and in eastern Germany.
The reason for this is that in regions with relatively high income levels a larger proportion of primary income is transferred to the State in the form of taxes. At the same time State social benefits amount to less than in regions with relatively low income levels.
The regional redistribution of wealth is generally less significant in the new Member States than in the EU-15. For the capital regions the values are between 80 % and 90 % and are almost without exception at the bottom end of the national ranking. This shows that incomes in these regions require much less support through social benefits than elsewhere. The difference between the capital region and the rest of the country is particularly large in Romania, at 15 percentage points.
In the 23 EU Member States examined here, there are 30 regions in which disposable income exceeds primary income. This is primarily the case in Poland, where, out of 16 regions, only the centres of economic activity around Warsaw, Gdansk and Poznan record values of below 100 %, and in Romania where four out of eight regions lie above the 100 % mark. In the EU-15 Member States, the most noticeable instances are six eastern German regions and two each in Portugal and the United Kingdom.
When interpreting these results, however, it should be borne in mind that it is not just monetary social benefits from the State which may cause disposable income to exceed primary income. Other transfer payments (e.g. transfers from people temporarily working in other regions) can play a significant role in some cases.
Dynamic development on the edge of the Union
The focus finally turns to an overview of mediumterm trends in the regions compared with the [[EU- 27]] average. Map 4 uses a five-year comparison to show how disposable income per inhabitant (in PPCS) changed between 2000 and 2005 compared with the average for the[EU-27.
It shows, first of all, the powerful dynamic processes in action on the edge of the Union, particularly in the case of most UK, Spanish and Romanian regions and in the Czech Republic, Slovakia and the Baltic States.
On the other hand, below-average trends in income are apparent in Belgium, Germany, Portugal and especially Italy, where even regions with only average levels of income were affected. The relative declines in Brussels and Vienna are less severe, however, as these regions have very high income levels.
The changes range from + 19.7 percentage points for Bratislava (Slovakia) to – 22.7 percentage points for Dytiki Makedonia (Greece).
Despite clear evidence of a catching-up process in the new Member States, the same positive trend is not found everywhere. In 13 of Poland’s 16 provinces incomes dropped behind the EU average by up to 2.6 percentage points, and in Hungary developments were less than satisfactory in two regions out of seven. The figures for Romania, on the other hand, are very encouraging. With an increase of 16.4 percentage points, the Bucureşti — Ilfov region achieved the third-highest relative improvement of all regions, with even the Nord-Est region (the region with the lowest income in the whole EU) catching up by 1.8 percentage points on average income growth in the EU. The structural problem nevertheless remains that in all the new Member States except Poland the wealth gap between the capital and the poorer parts of the country has widened further.
In all, the trend between 2000 and 2005 resulted in a slight flattening of the upper limit of the spread of regional income levels, especially as a result of fairly large relative falls in regions with high levels of income. At the same time, nine of the 10 regions at the tail end of the ranking have caught up considerably on the EU average.
Conclusion
The regional distribution of household income differs from that of regional GDP in a large number of NUTS 2 regions. This is mainly the result of State intervention in the form of monetary social transfers and the levying of direct taxes, which levels out considerably the disparities between regions. In some cases, other transfer payments and flows of other types of income received by private households from outside their region can also play an important role. On the other hand, unlike regional GDP, the figures for the income of private households are not affected by commuter flows.
Taken together, State intervention and other influences bring the spread of disposable income between the most prosperous and the economically weakest regions to a factor of about 7.0, whereas the two extreme values of primary income per inhabitant differ by a factor of 10.2. The flattening out of regional income distribution desired by most countries is therefore being achieved.
The income level of private households in the new Member States continues to be far below that in the EU-15, and in only a small number of capital regions are income figures more than two thirds of the EU average.
An analysis over the period 2000–05 shows that incomes in some regions of the new Member States are catching up only very slowly. Some Polish and Hungarian regions have actually fallen back compared with the EU average. In Romania, on the other hand, a strong catching-up process has taken hold — a development which, fortunately, extends beyond the capital region of Bucureşti — Ilfov.
For both primary and disposable income there is a clear trend towards a narrowing of the spread in regional values. Between 2000 and 2005 the difference between the highest and lowest values fell from a factor of 11.8 to 10.2 for primary income and from 9.0 to 7.0 for disposable income.
With regard to the availability of data concerning income, the comprehensiveness of the data and the length of the time series have gradually improved. Once a complete data set is available, data on the income of private households could be taken into account alongside GDP statistics when decisions are taken on regional policy measures.
Data sources and availability
Eurostat has had regional data on the income categories of private households for a number of years. The data are collected for the purposes of the regional accounts at NUTS level 2.
There are still no data available at NUTS 2 level for the following regions: Bulgaria, France’s overseas departments, Cyprus, Luxembourg and Malta. For Denmark and Slovenia only national data are available. For Italy regional figures were available only up to and including 2004, but national figures were available for 2005. The regional figures for 2005 were therefore estimated using the regional structure from 2004.
The text in this chapter therefore relates to only 23 Member States, or 251 NUTS 2 regions. Three of these 23 Member States consist of only one NUTS 2 region, namely Estonia, Latvia and Lithuania. Since the beginning of 2008 Denmark and Slovenia have consisted of five and two NUTS 2 regions respectively, but they appear here only as single NUTS 1 regions, as no data are yet available for the newly defined NUTS 2 regions.
Because of the limited availability of data, the EU-27 values for the regional household accounts had to be estimated. For this purpose it was assumed that the share of the missing Member States in household income for the EU-27 was the same as for GDP. For the reference year 2005 this portion was 0.6 %.
Data that reached Eurostat after 8 April 2008 are not taken into account in this chapter of the yearbook.
Context
One drawback of regional GDP per inhabitant as an indicator of wealth is that a ‘place-of-work’ figure (the GDP produced in the region) is divided by a ‘place-of-residence’ figure (the population living in the region). This inconsistency is of relevance wherever there are net commuter flows — i.e. more or fewer people working in a region than living in it. The most obvious example is the Inner London region of the UK, which has by far the highest GDP per inhabitant in the EU. Yet this by no means translates into a correspondingly high income level for the inhabitants of the same region, as thousands of commuters travel to London every day to work there but live in the neighbouring regions. Hamburg, Vienna, Luxembourg, Prague and Bratislava are other examples of this phenomenon.
Apart from commuter flows, other factors can also cause the regional distribution of actual income not to correspond to the distribution of GDP. These include, for example, income from rent, interest or dividends received by the residents of a certain region, but paid by residents of other regions.
This being the case, a more accurate picture of a region’s economic situation can be obtained only by adding the figures for net income accruing to private households.
Further Eurostat information
Publications
Main tables
- Regional economic accounts - ESA95
- Disposable income of private households, by NUTS 2 regions
Database
- Regional statistics, see:
- Regional economic accounts - ESA95
- Household accounts - ESA95
Dedicated section
Other information
External links
- Household Budget Surveys in the EU Methodology and recommendations for harmonisation – 2003
- Household budget survey (CODED - Concepts and Definitions Database)