Ranking and grouping of the districts of Sri Lanka based on the expenses of households: A multivariate analysis

Sri Lanka has twenty-five districts administrated under nine provinces. The cost of living (CoL) diverges among the districts in Sri Lanka like in many parts of the world. The rankings and groupings are useful tools for decision making by stakeholders. Principal component analysis and cluster analysis are used for ranking and grouping the districts, respectively, based on the expenses of a household in Sri Lanka. Sri Lankans spend more for non-food items than food items, particularly for housing and transport, and therefore non-food items are the most influencing factor to decide the CoL in the country. It is concluded that Colombo district is the most expensive district, followed by Gampaha and Kalutara, whereas Kilinochchi and Mullaitivu are among the least expensive districts in Sri Lanka. Districts with moderately high CoL were also identified. These classifications will facilitate investors to make their decision on where to invest more to gain more profit while satisfying the need of customers in that district. Further, this will help people to decide which part of the country will be suitable to settle in depending on their own income level and CoL. Moreover, this grouping will provide some information to policy makers when planning infra-structure development in the country, and it may also provide a direction to a new index to measure CoL in Sri Lanka.