Sorry, where is the contemporary art museum?
In September 2012, Tbilisi regained its status as the most expensive Georgian city with the local Khachapuri Index reaching 3.25 GEL (up 5%). Batumi slipped to the second position after only one month at the top of the rating: the local index increased by a rather modest 0.9%, reflecting weaker demand as a result of a decline in tourist arrivals. Kutaisi saw the largest hike in Kh-Index (9%), however, at 3.17 GEL per portion, it is still significantly cheaper than both Batumi and Tbilisi. Telavi, the cheapest city in our survey, is way behind, at 2.95 GEL. The price gap between the most expensive and the cheapest locations continued to expand from 0.21 GEL in July to 0.29 GEL in August to 0.30 GEL in September.
To some extent, the geographic variation in the prices of khachapuri ingredients is a function of the regional gap in wealth, wages and income, which directly affects consumers’ demand for goods and services. Thus, it is only natural that prices for locally produced goods, such as cheese, are higher in Tbilisi than in other cities. However, a crucial point is that the wealthier Georgian regions are wealthier not only in nominal terms. In other words, despite facing higher prices, an average Tbilisi household is able to maintain a higher level of consumption compared to any other location in Georgia.
The way to arrive at this conclusion is to calculate a measure of real income per capita for different Georgian cities, which is the average nominal income in a city (or region) divided by the corresponding index of prices. Alternatively, given the absence of regional price indices, we can divide the nominal per capita income for each location (the latest available GeoStat data are from 2011) by the corresponding Kh-Index. The resulting indicator of real income, reported in the chart, is rather straightforward: the number of (real) khachapuri portions a family can afford in each city of interest.
The results of our calculations are quite striking because incomes levels vary much more across cities than prices. For instance, while Tbilisi is about 10% more expensive than Kakheti, the nominal income gap between the two is over 50%: 814 vs. 531 GEL. Thus, taking September 2012 prices into account, the real per capita (Khachapuri) income gap between Tbilisi and Kakheti was only 10 percentage points lower than its nominal equivalent: slightly below 40% (250 vs. 180 portions).