How Do the Index and Comparisons at NovoExpat Work?
How Are the Comparisons Calculated?
At NovoExpat, we categorize the expenses of a “typical expat” into six main groups:
- Food
- Housing
- Clothing
- Transportation
- Personal Care
- Entertainment
This grouping follows international cost-of-living reports, which outline how expenses vary globally. By integrating data from these reports, we can estimate an average weight for each group within a standard expat’s typical expenditure.
Data Sources
Some sources we rely on include:
- National price indices in local currencies, OECD
- Harmonized Consumer Price Index, Spain’s National Institute of Statistics
- Consumer Expenditure Survey, US Bureau of Labor Statistics
- Cost of Living Basket, Chile’s National Institute of Statistics
Each group is divided into subcategories, each with its own weight. To represent these subcategories, we use a “proxy” product or service, which captures the general price trend for that area.
Data Collection Methodology
Our data collection is crowdsourced: users input prices from their city for each product and service in our index. The more prices we receive for a city, the more accurate the comparison becomes.
A statistical model then aggregates, cleans, and organizes the data, filtering out inaccurate and misleading entries. The model calculates an average price and a reliability score, indicating the quality of the data for each product or service.
If data for a city or product isn’t fully reliable, a prominent warning is displayed. Such cities are excluded from our general index but remain available for direct comparisons (with the warning visible).
Currency Conversion and Comparison
Once reliable prices are gathered, we convert each city’s prices to a common currency, updated every 3 days. Each product or service is then compared across two cities to determine price differences. By weighing each product according to its importance within its group, we adjust the price difference within the group and then across all groups. This approach yields the final cost difference between cities.
What is the CoLI?
The Cost of Living Index (CoLI) measures how expensive life is in one city compared to another. Updated daily, CoLI assigns a value to each city based on a central reference.
We chose Prague, Czech Republic, as our reference city, assigning it a CoLI value of 100. This choice is based on its balanced cost of living, significant expat community, and our team’s local presence, ensuring data accuracy and reliability.