REGIONAL DISPARITIES IN THE CZECH REPUBLIC: GDP AND DISPOSABLE INCOME

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1 REGIONAL DISPARITIES IN THE CZECH REPUBLIC: GDP AND DISPOSABLE INCOME Jaroslav Kahoun Centre for Economic Studies, University of Economics and Management, Prague

2 1. Introduction Regional gross domestic product per capita is a key indicator in the distribution of structural funds in the EU budget. For this reason there is increased attention paid to this indicator also in the Czech Republic in the last decade. Regional GDP is often mistakenly seen as an indicator of economic well-being of the population of regions. There is not taken into account an impact of commuting to work among regions and other limitations of this indicator. The question often arises, whether for the purposes of EU regional policy has been chosen an appropriate indicator. There is really need to consider the regional GDP as an indicator of economic performance in a particular territory, while for needs of regional disparities in wealth there is more representative indicator of disposable income of households. The presented analysis evaluates differences in regional disparities measured by these the two indicators and their evolution over time and evaluation the suitability of their use to support the under-developed regions in the Czech Republic and in the EU. 2. Regional GDP per capita Gross domestic product (GDP) is considered as the most important indicator of macroeconomic development. It represents the value of produced goods and services in all sectors in a given territory and for a certain period (annual, quarter). The gross value added is attributed to net taxes and subsidies on products. GDP is the most comprehensive indicator for measuring of macroeconomic performance, including estimates of the hidden economy, nonmarket production of households, etc. The regional GDP is often used in comparison with the national level or with multinational level. In most cases the regional GDP is usually compared to average GDP per capita of the EU27 in purchasing power standard (PPS). Using this indicator (PPS) is due to transformation of the value of all components of GDP to the average price level in the EU and thereby to eliminate differences in price levels in the EU. Eurostat published in press release on its website on February 18 th, 2010 the data on regional GDP in the EU27 for the year 2007 with the attached list of data for all regions NUTS 2. Gross domestic product per capita in PPS in the 271 NUTS 2 regions in the EU was between 26% of average in the region Severozapaden in Bulgaria and 334% in Inner London in the UK. For data users in the Czech Republic the most interesting figure was by far that region Prague was ranked as the fifth best region NUTS 2 in the EU (see Table 1). Without the knowledge of other circumstances many questions arise about reliability of such data. Does this mean that Prague overtakes in the wealth cities as Munich, Vienna, Paris or Amsterdam? With knowledge about the differences in wages between Prague and those cities it seems to be an incredible fact. Position of Prague in that comparison is mainly due to fundamental factors, which are not presented during publishing data in the media and therefore the Czech public is usually not informed. a) assessing of the NUTS 2 1 regions In these figures that Eurostat publishes on a regular basis only a regional level NUTS 2 is mostly considered. This level is crucial because most of the countries at this level implement regional government and also because on the basis of data for NUTS 2 level the largest volume of funds is distributed in the Structural Policy of the European Union. 1 NUTS Nomenclature of Statistical Territorial Units defined in the EU regulation 1059/2003 on basis of population size usually average population framework of regions in member states. 2

3 Table 1: Regional GDP per inhabitant in 2007 (in PPS, NUTS 2, EU27 = 100) The twenty highest: The twenty lowest: 1 Inner London (UK) Severozapaden (BG) 26 2 Luxembourg (LU) Nord-Est (RO) 27 3 Bruxelles-Cap. / Brussels Hfdst. (BE) Severen tsentralen (BG) 27 4 Hamburg (DE) Yuzhen tsentralen (BG) 27 5 Praha (CZ) Yugoiztochen (BG) 31 6 Île de France (FR) Severoiztochen (BG) 32 7 Southern & Eastern (IE) Sud-Vest Oltenia (RO) 33 8 Groningen (NL) Sud-Est (RO) 34 9 Oberbayern (DE) Sud-Muntenia (RO) Stockholm (SE)) Podkarpackie (PL) Wien (AT) Lubelskie (PL) Bratislavský Kraj (SK) Észak-Alföld (HU) Bremen (DE) Észak-Magyarország (HU) Berkshire, Buckinghamshire & Nord-Vest (RO) 40 Oxfordshire (UK ) 15 Darmstadt (DE) Podlaskie (PL) Utrecht (NL) Warmińsko-Mazurskie (PL) North Eastern Scotland (UK) Dél-Alföld (HU) Hovedstaden (DK) Swietokrzyskie (PL) Noord-Holland (NL) Centru (RO) Åland (FI) Dél-Dunántúl (HU) 43 Source: Eurostat, Newsrelease, February 18 th, Completely different results, however, we get in comparison of NUTS 3 regions which correspond to regional self-governing units in the Czech Republic (so called kraje ). Prague in this case occupied only 56th place in the EU fully incomparable with the 5th place in case of NUTS 2. The reason for this significant decrease is primarily the fact that urban regions are usually defined in the EU at regional level NUTS 3. Conversely, in Czech Republic, where Prague is a separate autonomous region, the city has been designated as the NUTS 2 region, which among other things related to the fact that the overall average size of NUTS 2 regions is in the Czech Rep. at the lower limit of compulsory framework in the EU and vice versa at the NUTS 3 regional units size is close to the upper limit of appropriate framework for NUTS 3. From the above, the Czech regions NUTS 2 are in the size more similar to European NUTS 3 regions, which is one of the causes of the extraordinary position of Prague in the EU comparison of NUTS 2 regions. b) position of Prague in the Czech Republic is unique Status of the Czech capital among the 14 Czech administrative regions is quite exceptional. The region is defined by the exact boundaries of the city and does not include neither close surrounding. Metropolis is a home for a majority of government institutions and the headquarters of the majority of companies are located here. Prague as a region has not comparable competition. The importance of the city region illustrates the fact that in its territory lived 11.75% of the population of the Czech Republic, there were employed 17.66% employees and city created 25.32% of GDP of country in GDP per capita is double of the national average. Extraordinary advance of Prague in economic performance per capita is due to several key factors, namely: high rate of commuting to work (in 2008 amounted to 18.5% of all employees in Prague), the concentration of gross value added generated by the government 3

4 sector, the concentration of most of the services sector (banking, insurance, telecommunications), a higher price level which is not reflected in the regionally different conversions of GDP at purchasing power parity and high compensations of employees that serve as a key to the allocation of regional gross value added for the multiregional organization. With the advent of social change after the fall of communism since the nineties the differences in wealth began to deepen in the Czech Republic, not only among people but also among regions. This trend was consistent with other changes associated with the abolition of centrally controlled state economy and elimination of income equality. Economic wealth is in market economies generally more concentrated in the capital or economic and financial centre of the state. Share of GDP of Prague on the Czech Republic total has increased since 1995 from 20% to more than 25% in 2008 (see Table 2) and GDP per capita from 171% to 216% of national average (see Table 3). Table 2: Regional structure of GDP, Czech Republic = 100 Territory NUTS Česká republika Praha 20,0 19,9 20,8 22,0 22,6 23,0 23,6 23,8 23,9 23,5 24,0 24,2 24,9 25,3 Střední Čechy 9,3 9,2 9,4 9,7 10,1 10,2 10,2 10,5 10,5 10,6 10,3 10,7 10,8 10,7 Jihozápad 10,9 11,1 10,9 10,8 10,7 10,6 10,6 10,5 10,5 10,7 10,6 10,6 10,2 10,2 Severozápad 10,3 10,2 9,7 9,5 9,3 9,0 8,7 8,8 9,0 8,9 8,8 8,6 8,5 8,6 Severovýchod 13,2 13,1 13,3 13,1 13,0 13,0 12,8 12,7 12,4 12,3 12,3 12,1 11,9 11,6 Jihovýchod 14,9 15,0 14,6 14,6 14,5 14,5 14,7 14,5 14,6 14,4 14,3 14,3 14,3 14,2 Střední Morava 10,5 10,4 10,5 10,1 9,9 9,9 9,7 9,7 9,6 9,5 9,4 9,3 9,3 9,3 Moravskoslezsko 10,9 11,1 10,8 10,3 10,0 9,7 9,7 9,5 9,6 10,1 10,4 10,1 10,2 10,1 Source: Czech Statistical Office. Table 3: Regional GDP per capita, Czech Republic = 100 Territory NUTS Česká republika Praha Střední Čechy Jihozápad Severozápad Severovýchod Jihovýchod Střední Morava Moravskoslezsko Source: Czech Statistical Office. Despite the above the ratio of GDP per capita in the most powerful region to the country average is in the case of Prague not extraordinary in comparison with other EU countries. In eight countries of the EU the ratio of GDP per capita in the most powerful region to the state average is higher than in Czech Republic. That ratio varies from 1.3 in Vienna to 3.1 in Warsaw (see Chart 1). 4

5 Chart 1: Ratio of GDP per capita in the most developed region to national average (regions NUTS 3) 3,0 GDP per capita in PPS NUTS3 highest/state average 2,5 2,0 1,5 1,0 PL Warszawa UK Inn. London DE München FR Paris SK Bratislavský kraj RO Bucuresti BG Sofia HU Budapest CZ Praha BE Bruxelles LV Riga PT Lisboa LT Vilniaus NL Groningen EE Põhja Eesti IT Milano IE Dublin ES Alava GR Voiotia SI Osrednjeslovens DK København FI Uusimaa SE Stockholms län AT Wien Source: Eurostat Database, own calculations. The figures in chart show that the lower rate of regional disparity of the most powerful region is probably a result of government redistribution in Scandinavia or Austria and in contrast, a higher disparity is in some of new EU member states and in the UK. In the top ten there are only four regions common classified as NUTS 2 and NUTS 3 units. c) Czech Republic strongly converged to the EU average In , GDP per capita in PPS increased in the Czech Republic from 70.4% to 80.1% of the EU27 average, it means by almost ten percentage points (see Table 4). Alongside this fact there increased also the position of Prague in the regions of the Czech Republic and in the EU. Despite the development of industry, particularly in regions outside of Prague, Prague GDP growth was higher than average GDP growth in state, especially in 2007 due to increase in the trade and finance industry, which was reason of the convergence of Prague from 12 th to 5 th place in the EU list of NUTS 2 regions in that year. Table 4: Regional GDP per capita, EU27 = 100 Territory NUTS Czech Republic 75,2 72,9 70,4 69,5 68,5 70,2 70,4 73,4 75,1 75,9 77,0 80,1 Praha 128,2 129,9 133,3 135,8 136,6 145,3 147,6 153,9 154,5 158,5 161,8 171,8 Strední Cechy 64,8 63,6 63,7 64,9 64,4 65,3 67,2 69,2 71,3 69,8 72,8 75,2 Jihozápad 72,6 69,5 66,2 64,7 63,5 64,7 64,0 66,9 69,6 69,9 70,8 71,1 Severozápad 70,0 64,6 60,9 58,7 56,2 55,8 56,3 60,0 60,8 60,5 60,6 61,7 Severovýchod 68,1 66,8 63,5 62,2 61,6 62,0 61,6 62,8 63,9 64,3 64,3 65,9 Jihovýchod 69,8 66,1 63,7 62,4 61,4 64,0 63,7 66,6 67,2 67,6 68,8 71,7 Strední Morava 64,6 63,2 58,8 57,0 56,0 56,6 56,4 58,3 59,5 59,3 59,8 62,3 Moravskoslezsko 66,9 63,1 58,1 55,6 53,4 54,7 54,1 56,7 61,4 64,2 64,1 67,5 Source: Eurostat Database. 5

6 3. Limitations of information capability of GDP per capita For a real comparison of the economic level of EU countries rate of PPS is generally used (purchasing power standard). The conversion of the PPS is implemented only at national level in the framework of the European Comparison Programme (ECP). Eurostat receives regional GDP from the EU countries at current prices in national currency 24 months after the end of the reference period and on the basis of these data performs a conversion into the PPS according to national deflators. Limiting factor for the regional comparison is the fact that through PPS only the exclusion of the differences in price levels among countries is done but still the differences in price levels among regions within countries exist. Differences in price levels among metropolitan areas and other regions are considerable, mainly due to the cost of rents and certain other services. This has meant that the nominal gross value added in the capital is higher, than it can be used as real incomes and population is in fact less rich than it seems. Czech Republic is in this respect a typical example because capital is allocated as a single NUTS 2 region defined by the exact boundaries of the city. For the calculation of GDP at the regional level the production method is used. The indicator represents the total value of goods and services produced and provided in the region by persons employed in the region. Thus generated income is then a subject to a number of interregional transfers of households and national redistribution and only part of GDP is related to the inhabitants of the region. This is a key factor why regional GDP is unsatisfactory indicator to reflect the regional population wealth. The main drawback of regional GDP per capita is a fact that the value of the GDP according to the 'workplace' is divided to a population on basis of residential principle. This inconsistency is strongly influenced commutation to work (people that work in one region but live in another). The most obvious example is in the metropolitan regions. Eurostat also draws attention to this fact in a short press release together with publishing data about GDP for the NUTS 2 regions in the EU: "It should be noted, however, that in some regions the GDP per inhabitant figures can be significantly influenced by commuter flows. Net commuter inflows in these regions push up production to a level that could not be achieved by the resident active population on its own. The result is that GDP per inhabitant appears to be overestimated in these regions and underestimated in regions with commuter outflows." 2 As it was already stated the ratio of commuting to work was in Prague 18.5% of total employment in the metropolis in Disposable income of households in the regions With regard to the above constraints of the indicator of GDP per capita for regional comparisons of economic well-being of citizens of EU regions (interregional transfers, commutation to work) it is better to use the indicator of regional disposable income of households that is based on residential approach. It is the result of income and expenditure recorded in the secondary distribution of income account. It shows how the balance of primary income (compensation of employees, mixed income, operating surplus and property income) is redistributed: current taxes, social contributions and benefits and other current transfers. Indicator pretty much indicates the level of material wealth of households permanently residing in different regions. 2 Eurostat websites ( 6

7 Although this indicator has a closer relationship to the wealth of the population in regions its use in publication is rather marginal. The reason is its limitation for using in international comparisons of the very different degrees of state redistribution in the EU countries and especially the fact that the indicator is not used like GDP as an instrument of financial transfers under the structural and regional policies of the European Union. Tables 5 and 6 illustrate the position of Czech NUTS 2 regions in indicator of disposable income of household. Table 5: Regional structures of Disp. Income of Households, Czech Republic =100 Territory NUTS Česká republika Praha 14,5 14,6 14,8 15,1 15,4 15,3 15,4 15,5 15,8 15,6 15,5 15,8 15,7 15,7 Střední Čechy 11,0 11,0 11,0 11,3 11,4 11,3 11,4 11,8 11,9 12,0 11,9 12,1 12,3 12,4 Jihozápad 11,4 11,5 11,4 11,3 11,3 11,3 11,4 11,2 11,3 11,3 11,3 11,3 11,3 11,3 Severozápad 10,5 10,5 10,5 10,3 10,2 10,3 10,1 9,9 9,9 9,8 9,8 9,8 9,6 9,6 Severovýchod 13,9 13,8 14,1 14,0 13,9 14,0 13,9 13,9 13,6 13,7 13,8 13,7 13,7 13,6 Jihovýchod 15,4 15,4 15,3 15,3 15,3 15,3 15,4 15,3 15,2 15,5 15,5 15,2 15,5 15,3 Střední Morava 11,3 11,3 11,4 11,3 11,2 11,2 11,2 11,3 11,2 11,1 11,0 11,2 11,2 11,0 Moravskoslezsko 11,9 12,0 11,7 11,5 11,4 11,3 11,2 11,2 11,0 10,9 11,1 10,8 10,9 10,9 Source: Czech Statistical Office. Table 6: Regional Disp. Income of Households per capita, Czech Republic =100 Territory NUTS Česká republika Praha Střední Čechy Jihozápad Severozápad Severovýchod Jihovýchod Střední Morava Moravskoslezsko Source: Czech Statistical Office. 5. Limitations of information capability of disposable income As well as GDP per capita the indicator of disposable income has a little information especially valid for international comparisons of regional values. Firstly it is not able to provide the conversion for international comparisons on basis of regional purchasing power standards and therefore it can not eliminate the influence of the differences in price levels among regions that are between the metropolitan area and other regions significant mainly due to the cost of rents and certain types of other services. A second limitation relates again to international comparisons because income of households faced to relatively strong level of income transfers between institutional sectors (especially between government and household sectors). 7

8 The last mentioned issue was dealt by Axel Behrens in Eurostat (see Statistics in Focus 6/2003: How Rich are Europe s Regions? and 7/2003: "Household Income and GDP in the European regions"). Among countries proportion of disposable income of households on GDP is rather different. In Sweden and Finland it is about 45%, in France, Spain and the UK it is around 60%, followed by Germany and Italy with about 65%, and highest it is in Greece (70%). This difference creates difficulties for comparison of regional disposable income across the EU. The regions of Sweden and Finland are relatively low given the state in these countries largely funded public services. Part of income of state from taxes is returned back to the citizens in any other way. Public service is generally for citizens, for their personal needs and they spend less. In this particular case the state uses its resources to finance public services such as kindergartens, medical facilities, etc. and the household does not need so high income to buy this service in the private market. Subsidized public transport system reduces the private costs associated with transport of passenger cars etc. Existing inter-regional comparisons of disposable income of households (mainly in international comparisons) therefore have only limited view on the welfare of the region that is given both by private consumption and public goods and services. Disposable income of all sectors Axel Behrens tried to make imputation of the disposable income of all sectors in the EU. This experimental calculation is matter of the following description. The difference between the disposable income of all sectors and disposable income of household is disposable income of other sectors. The regional accounts in the EU this income of other sectors usually do not compile. Disposable income of households in the countries of the European Union is the largest component of total disposable income, in the individual EU countries it varies from 56% to 78% (average 71%). Regional data for other sectors including the operating surplus and property income of companies is not available. Because these components are also substantially contributing to the wealth of regions, their neglect greatly hampers the comparability of multiple regions from different countries. Following description is the way of transition from GDP to disposable income of households in the national accounts: Gross domestic product at market prices + Primary income from non-residents (+) / non-residents (-), Net - Consumption of fixed capital = National income at market prices, Net + Current transfers from non-residents (+) / non-residents (-), Net = Disposable income of all sectors (100%) - Disposable income for the financial and non-financial companies and non-profit organizations (average 4%) - Disposable income for the government (average 25%) = Disposable income of households (average 71%) 8

9 Taking into account the above mentioned approaches in the national accounts the experimental calculation used following procedures: 1) household disposable income was divided among the regions according to regional structures which were already known; 2) The difference between "disposable income for all sectors" and "disposable income of the household sector" could be divided into different regions according to population in the region of the permanent resident. The procedure of Section 2) is necessary because the information about the regional breakdown of the indicator is not available with the exception of disposable income for the household sector. This method is relatively more acceptable for the government sector than private organizations. However, considering how low a percentage of the whole is related, we can say that restriction on the private sector has only a marginal character. Findings of experimental calculations Based on the newly created indicator the major shifts in the positions of regions adjacent to metropolitan areas such as around London, where the London - suburb improved its position by 88 points in the EU, which is just a consequence of commuting to work. Net commuting to work undoubtedly played a role in the region of Flevoland (Netherlands) and Namur (Belgium) which advanced more than 60 places in the regional ranking. Significant changes in the ranking of regions can be monitored also in Germany. Five new federal states (Land) improved their position about an average 15 points, while Berlin and Hessen declined. As for the relative positions, the highest decrease was observed in the region of Prague (Czech) and Madrid (Spain). The following table showed the "winners" and "losers" of changes in the ranking of the new regional indicator instead of gross domestic product. Table 7: Repositioning Regions Change in ranking of regions Other London (UK) +88 Flevoland (NL) +65 Drenthe (NL) +61 Namur (B) +60 Hainaut (B) +58 Oost-Vlanderen (B) +56 : : Lisboa e Vale do Tejo (P) -62 Navarra (E) -76 Baleares (E) -76 Cataluna (E) -81 Madrid (E) -91 Praha (CZ) -153 Source: Behrens, A.: How Rich are Europe s Regions?, Eurostat, Statistics in Focus 6/

10 6. Comparison of GDP and disposable income in the regions of the Czech Republic Unlike above mentioned restrictions of disposable income of households at the EU level, at national level this indicator can be used to compare regional disparities without problems. Chart 2 shows regional variations in the structure of GDP and disposable income of households at NUTS 3 level in the Czech Republic. Big drop in position in the disposable income compared to GDP is particularly noticeable due to commuting to work in Prague (PHA), while the positions of all other regions has improved most in the Central Bohemia (STC) region which is the background of the workforce for the city Prague. Chart 2: Regional shares in GDP and in disposable income in the Czech Republic in % Ratio on GDP (2008) Ratio on disposable income (2008) OLO 4,7 ZLI 4,6 MVS 10,1 JHM 10,1 VYS 4,1 PAR 4,1 KVH 4,4 LIB 3,1 UNL 6,4 KVA 2,1 PHA 25,3 PLZ 4,9 STC 10,7 JHC 5,3 ZLI 5,4 MVS 10,9 OLO 5,6 VYS 4,7 JHM 10,7 PAR 4,7 KVH 5,1 LIB 3,8 PHA 15,7 UNL 7,0 STC 12,4 PLZ 5,4 KVA 2,6 JHC 5,9 Source: Czech Statistical Office, own calculation. Significantly different results we can also see in a comparison of regional disparities over time. Disposable income of households has evolved since 1995 almost without widening of regional disparities unlike the development of GDP per capita. Chart 3 shows the evolution of coefficient of variation (rate of standard deviation and the average of the indicator). Disposable income grew only very slightly since 2000, virtually stagnated opposite to GDP. It can be therefore concluded that the widening of regional disparities in economic performance was mainly the result of increased commuting, the concentration of operating surpluses of companies and capital in certain regions and to a lesser extent it was the result of the development of primary income of households (as we expect that the level of transfers in the secondary distribution of income taxes, social benefits, etc. relatively in this period did not change significantly). 10

11 Chart 3: The evolution of the variability of regional indicators (coefficient of variation at NUTS 3 level) 0,4 0,3 Disp.income per capita GDP per capita 0,2 0, Source: Czech Statistical Office, own calculation. Chart 4 shows the evolution of both indicators evaluated in Prague. It is obvious that in the case of disposable income there was almost no widening gap between Prague and other regions, while in GDP per capita there was a relatively significant increasing gap in this period. Chart 4: GDP per capita and disposable income per capita in Prague (Czech R. = 100) Disp.income per capita GDP per capita Source: Czech Statistical Office, own calculation. 7. Appropriateness of the use of indicators for EU Structural Policy In the discussions on the future of EU Structural Policy and changing the rules of the EU budget framework the change of the criteria for regional aid is often proposed. Some proposals offer the adoption of the household disposable income as a better indicator to 11

12 express the wealth of regions than the GDP per capita. Changes the rules are apparently for political reasons impassable. Regional disparities in the assessment of both indicators provide a completely different view of the backwardness of the region and would lead to radical changes in direction for financial assistance. Concentration of economic power (GDP per capita) in the economic strong regions enables to retain the view of the surrounding regions such as the relatively backward areas and to keep the right on their financial support. This may be a case of regions in Spain, Italy, eastern Germany, but also in the Czech Republic. In assessing the criteria of disposable income of households probably more regions lost their entitlement to financial support. An important argument against amending the criteria for allocation of funds is a question of what is it really a regional wealth? It is actually more wealth the region in which the people with high incomes permanently live than other region where high economic performance exists but workforce is permanently resides elsewhere? It is obviously not true that people employ in Prague enjoy their disposable income outside the region in their homes. These people often buy and bids for goods and services at their workplace (in city) and into their home they go only to sleep. Companies for which these people are doing the work are paying local taxes, investing, and often financing the development of public infrastructure in city. Conversely region where people only live has no revenue directly associated with their economic activity, however, has many expenses with providing infrastructure and public services e.g. in the emerging satellite suburbs. To capture the subsequent transfers in this case it could serve indicator of uses disposable income (household final consumption) which again would provide different regional structures in comparison with the two indicators evaluated. For this purpose, however, there is no representative statistics in most cases in the EU countries available. The same is the case of the Czech Republic where in particular does not exist the representativeness of household budgets statistics at regional level. 8. Conclusion Regional GDP per capita and regional disposable income of households per capita in the Czech Republic offer (and we can assume that also in other countries) a very different view of the level of regional wealth. The differences are the result of regionally differentiated commuting to work and the result of a national redistribution of funds among institutional sectors. Significant advance in economic output (GDP) per capita is in Prague where it is in contrast with a much weaker position in the disposable income of households per capita. But also an indicator of disposable income of households has limitations mainly resulting from the fact that it does not capture the richness of other institutional sectors and the region as a whole. Disposable income by place of residence does not determine the place of final consumption of households (the use of income). Given the above limitations it can be considered as logical the conservation of indicator of GDP per capita as a key base for the assessment of regional funds in EU Structural Policy. It is the most reasonable approach but together with comments on limited explanatory power of regional GDP and publishing of alternative indicators, in particular regional disposable income of households. 12

13 References [1] Behrens, A.: Income of Private Households and Gross Domestic Product in Europe s Regions, Eurostat, Statistics in Focus 7/2003. [2] Behrens, A.: How Rich are Europe s Regions?, Eurostat, Statistics in Focus 6/2003. [3] Evropský systém účtů (ESA 1995), ČSÚ, Praha [4] Kahoun, J.: Ukazatele regionální konkurenceschopnosti v České republice, Praha, CES VŠEM, Working Paper 5/2007. [5] Regional Accounts Methods Gross value-added and gross fixed capital formation by activity, statistical manual, Eurostat, Luxemburg [6] Regional Accounts Methods Household accounts, statistical manual, Eurostat, Luxemburg Keywords: regional indicators, regional gross domestic product, regional disposable income. JEL Classification: E01, R11, R12, R13 Jaroslav Kahoun Centre for Economic Studies, University of Economics and Management, Prague Narozni 2600/9a PRAHA 5 phone: jaroslav.kahoun@vsem.cz Obsah 1. Introduction Regional GDP per capita Limitations of information capability of GDP per capita Disposable income of households in the regions Limitations of information capability of disposable income Comparison of GDP and disposable income in the regions of the Czech Republic Appropriateness of the use of indicators for EU Structural Policy Conclusion References ANNEX: Map of Czech regions NUTS 2 and NUTS

14 ANNEX: Map of Czech regions NUTS 2 and NUTS 3 14