Why Luxembourg has the highest GDP per capita (nominal & PPP)?
There are two main reasons for the high GDP per cepita (both of which should make people think twice before concluding that Luxembourg is some kind of economic powerhouse). First, it is a tax haven within the EU and attracts *many* financial institutions that service all of Europe. In fact, the financial sector accounts for 28% of the nation’s GDP and employs more than 11% of its entire labour force! Given that this sector is a high value-added sector, that pushes up GDP per capita. Second, though no less important, is the fact that 60% of the Luxembourg labour force does not live in Luxembourg!!! Instead, they commute from neighbouring cities in Belgium, France, and German. So, the economic output generated by these individuals are counted as domestic product for Luxembourg but the people who generate that product don’t live in the country and so aren’t part of its population when we calculate GDP *per capita*.
