Why Are Scandinavian Countries So Expensive?


The Scandinavian countries are among the wealthiest, safest, and happiest societies in the world today. Their high quality of life makes them a top draw among prospective immigrants. But why are countries like Sweden, Denmark, and Norway so expensive to live in?

Scandinavian countries are expensive to live in because they are among the most economically advanced nations in the world today. High levels of competitiveness and productivity and robust welfare systems, wages, and currencies keep prices of goods and services high in Sweden, Denmark, and Norway.

This article will explain why Scandinavian countries are considered expensive and point out the most and least expensive Scandinavian countries to live in. 

Norway Sweden Scandinavia
Why are Scandinavian countries considered expensive? See below

Why Are Scandinavian Countries Considered Expensive?

Scandinavian countries are considered expensive because the cost of goods and services there is among the highest in the world. High wage and tax rates and strong currencies are the main reasons the cost of living is so high in Sweden, Denmark, and Norway.

Measured by per capita GDP, the Scandinavian countries—Sweden, Denmark, and Norway—are some of the wealthiest nations in the world today. They also consistently rank near the top in surveys of economic competitiveness. [1]

While the origins of their great wealth are rooted in natural resource industries, it is also characterized by some unique features. Scandinavian economies sustain their consistent outperformance by fostering a high quality of human capital. This is where their renowned state-supported welfare systems come in.

Sweden, Denmark, and Norway have used the wealth generated by their early industrialization to develop some of the most robust welfare systems in the world. They offer free education and healthcare for all their citizens, among many other measures of state support for citizens.

While the combination of highly competitive economies and robust welfare systems makes the Scandinavian countries very desirable places to live and work in, these same features also make them some of the most expensive places in the world to live.

The near-uniformly high quality of human capital and the highly competitive economies of the Scandinavian countries mean that wages here are among the highest in the world.

In fact, none of these countries requires a minimum wage, as wages, set through collective bargaining and agreements made by workers’ associations, tend to be high by default. [2]

In turn, the consistently high wages in Scandinavian countries drive up the prices of goods and services produced here as employers have to account for higher wages in pricing their products. 

The prices of goods and services sold in Scandinavian countries are also significantly affected by high rates of indirect tax collection. While most people are familiar with these countries’ progressive income tax systems, few are aware that Sweden, Denmark, and Norway also levy Value-Added Tax at rates of 25%. [3]

Finally, their sound fiscal management and competitive export industries have made the currencies of Scandinavian countries highly desirable for international buyers and investors. Over time, this has led to the revaluation of their currencies. 

Their strong domestic currencies cause goods priced in Scandinavian currencies to appear expensive in relation to goods priced in other currencies. This is another reason why Scandinavia seems expensive to people from other parts of the world.

Sweden expensive
Which Scandinavian country is the most expensive to live in? See below

Which Scandinavian Country Is the Most Expensive To Live In?

Norway is the most expensive Scandinavian country to live in. The Norwegian Krone is highly valued, pushing up the price of goods and services valued in the currency. Despite being a significant oil and gas producer, the country also has some of the highest taxes on gas in the world. 

Norway was a late developer among the Scandinavian countries. Sweden and Denmark had a headstart on industrialization and had much higher living standards for much of the 19th century. 

However, since the latter half of the last century, Norway has quickly closed the gap with its Scandinavian neighbors. Today, it is the wealthiest nation in the region.

Much of Norway’s wealth springs from the discovery of oil reserves in the North Sea in 1969. Unlike many other countries that are rich in valuable natural resources, Norway has funneled the wealth generated by its oil and gas industry into developing a society that benefits all Norwegians.

This is why, in spite of being one of the largest oil and gas producers, it levies some of the highest taxes on gasoline in the world. High taxation of petroleum products generates significant revenue for the state, which it uses to support a strong welfare system for its citizens. It also drives up the cost of living in the country.

Over the years, its strong exports and prudent wealth management have driven up the value of the Norwegian Krone relative to other currencies. This is another significant factor in making goods and services priced in Norwegian Krone relatively expensive.

A recent survey by CEOworld Magazine found Norway to be the second-most-expensive country in the world to live in, behind only Switzerland. [4] While Norway’s Scandinavian neighbors all ranked in the top 25, none were deemed more expensive to live in.

Denmark expensive
Which Scandinavian country is the least expensive to live in? See below

Which Scandinavian Country Is the Least Expensive To Live In?

Sweden is the Scandinavian country that is the least expensive to live in. While still relatively high by global standards, the cost of living is lower in Sweden than in Denmark or Norway.

As per the survey linked to in the previous section, Sweden has the most affordable cost of living of the three Scandinavian nations. At 23, Sweden still ranks high as one of the most expensive countries in the world. It’s just not as expensive as either Norway or Denmark.

The survey reviewed data from multiple studies of consumer prices and cost of living and consulted numerous national and international media reports to arrive at its findings. These account for the prices of various goods and services, including: 

  • Housing
  • Clothing
  • Transport
  • Utilities
  • Food
  • Entertainment

Based on the composite of these reports, it can be presumed that the cost of living is lower in Sweden than in its Scandinavian neighbors.

Conclusion

Scandinavian countries are expensive to live in because they offer some of the highest standards of living of all the countries in the world today. 

References:
[1] Source
[2] Source
[3] Source
[4] Source

Christian Christensen

Christian started Scandinavia Facts to explore his family heritage, raise awareness of one of his academic interests as a professor, and civilly promote the region. Please see the About page for details.

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