Living Cost Gap in the European Union Member States

The living cost gap refers to the differential amongst income, expenditures, and poverty lines. It is important since it addresses a number of aspects that point towards historic and continued living standards. The purpose of this study is to identify, measure, and compare the living cost gap in the Europe Union member states. Twenty-nine indicators/criteria from Eurostat and World Bank, covering the period 2008-2017, are employed. In order to rank and compare living cost gap by countries, objective functions for each criterion are defined and applied. The importance of each criterion is assessed independently. The composite living cost gap indicator for each MS is calculated using multiple criteria decision support methods. The relationship between the compound annual growth rates of this indicator and each single criterion is estimated and evaluated. The findings of the study suggest that living cost gap is higher where unemployment rates and households' expenditure on basic needs (housing, food etc.), are larger, while living cost gap is lower where households' income and expenditure on optional needs are higher. The living cost gap in the majority of countries tends to narrow/decrease, along with the increase in the household income and expenditures. Our research highlights the need to mitigate unemployment and households' low net income in order to alleviate living cost gap. The analysis and assessment of living cost gap might help identifying the most vulnerable social profiles and groups, and hence might contribute to the adequate formulation and implementation of targeted policy responses and interventions at European Union, national, and regional level.