Norway is Not That Expensive

Senior Adviser Einar W. Nordbø confronts the myth of Norway as a very expensive country in a newly publsihed note of Norway‚Äôs central bank (Norges Bank).

Accessible goods in shops go along with large numbers of their paycheck. What matters is the relationship between income and prices.

– Developments in the Norwegians‚Äô purchasing power has been particularly strong over the last 10-15 years. We can buy more goods and services per working hour, and in Norway, this development has been more rapid than in other countries, says Nordbø.

Nordbø test the theory with the statistics for 33 European countries from 1995 to 2012.

They show that high income goes along with high prices in the statistics. When the income of a country is one percentage point higher than in other countries, it pulls up the price level 0.4-0.5 percentage points in comparison to other countries.

He transmits this correlation to Norway: From 1995 to 2012, the production volume per. capita increased about 60 percentage points more than the EU average. Measured in this way, Norway increased its efficiency very much compared to the rest of Europe.

Nordbø writes that prices in Norway rose 24 percentage points more than in other European countries from 1995 to 2012. Norway is therefore becoming increasingly more expensive, but production and earnings per. capita has risen even more.

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