How does it work?
How are the comparisons calculated?
First of all, the expenses of a "typical expat" (if such a thing exist) is divided in 6 groups:
This grouping is based on international reports about cost of living variations. Combining information available in some of these reports, we can work out an average weight for each group within the total typical purchase basket of expats.
Some of the sources used are:
- Expenditure at national prices in national currencies, OCDE
- Índice de Precios de Consumo Armonizado. Unión Europea y España, Spain's National Institute of Statistics
- Average annual expenditures and characteristics, Consumer Expenditure Survey, Bureau of Labor Statistics, US DOL
- Canasta nuevo IPC Gran Santiago, Chile's National Institute of Statistics
Each of these groups is subdivided in further groups, each of them with a different weight inside the supergroup. Each of these subgroups is captured in our database by using a 'proxy' representative product.
Our users enter prices, in a collaborative manner, for each of these products, in all the cities available.
Of course, the more data entered, the more accurate comparisons will be.
If there is enough data available for a certain item, it gets filter and selected. First, older data get discarded. From the remaining data the first and last quintile are again discarded. The remaining data is then averaged.
In any casem, if the available data is in some way deemed not good enough (it's old, or few, or it contains wildly different data), a warning will be shown saying so.
At this point, comparing two cities is a simple matter of comparing prices of individual items, and combine the results in the price difference of the group they belong to (using the weights of each time to adjust its relevancy). Then the price difference of the groups get weighted and combined to get the final price difference between cities.
What is the CoLI
The CoLI attempts to be a measure of how expensive (or cheap) life in a city is. It gets recalculated every day, and puts every city in relation with each other by assigning them a CoLI value.
To calculate each cities' CoLI value, we start by assigning a value of 100 to a central reference city (that happens to be Prague). Once the reference point has been stablished, the CoLI value of every other city in the database is calculated by comparing their CoL to the CoL in Prague.
Prague was chosen as the 'central reference' (with a value of 100) for a number of reasons:
- It is not among the most expensive cities, neither among the cheapest.
- It has an important expat community.
- And most importantly, I live in Prague, and therefore it will always have abundant, reliable and up-to-date price information.