How to Define the Value of a Region? Austrian Provinces for Sale!
Although regions as part of countries are described by many indicators in terms of employment (and other labour market figures), production (again with various data), various measures of productivity as well as wellbeing the question as to a one dimensional figure to approach the value of a region is rarely taken into consideration. Yet every now and then such questions do come up. In medieval and even renaissance times regions were bought and sold by ruling kings and emperors. When a few years ago Greece was in big financial difficulties the question was raised if one of the islands could or should be sold (without getting into the details of an adequate price).This paper will make an attempt to find a method for giving regions a one dimensional economic value (besides describing them with the above alluded variety of indicators). It will take the nine provinces of Austria as case study for such an approach and to find an answer to the thought experiment as to their price in case one of them has to be sold. It will apply a well-known economic method to find a price and to compare them as to their attractiveness for a fictitious bid of potential investors. It will treat these regions as potential investments on a capital market and apply the economics of credit and discounting to each of them.Basically it will regard regions as an asset and apply the evaluation procedure of discounting to find a price of the asset. The paper will outline this method using production figures and an expected rate of interest for each of the provinces. The resulting prices will be presented and compared to each other. Finally the outcomes, their comparability and applicability will be discussed.
Index Terms - Comparative Value, Discounting Approach, Regions As Assets, Regional Economics.