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Despite being a small country (area-wise), how Switzerland can sustain a high cost of living?

I get the logic that the pay of employees would be proportionally higher, so they can sustain a high cost of living. Not the entire country is mountainous, at the least the cost of living should be comparable to neighboring countries especially in the plains.

How does it be able to sustain the economy of border areas where people can do shopping in the neighboring countries?

Am I asking the right question? Clearly, there is some piece of the puzzle about Switzerland, that I don't get.

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Similarly to how you mention that high salaries lead to the population being able to sustain a high cost of living, we can look at goods and services from the supply side. As the minimum wage and wages overall are very high in Switzerland, meaning high labor and input costs, high prices compensate for it.

Furthermore, there is also an element of low income taxes (in comparison to neighboring countries France, Germany, etc.) leading to higher disposable income of the Swiss population. The high salaries, combined with low taxes, result in an increased demand for goods and services, driving up the prices.

Lastly, regarding your point about sustaining a significantly higher cost of living in comparison to neighboring countries, Switzerland is part of the Economic European Area (EEA), but not in the EU. This means that there are trade barriers (tariffs) between the surrounding EU nations and Switzerland. In fact, this is why many online stores in Europe do not ship to Switzerland. And if you were to purchase goods directly from abroad, you would have to pay the customs fees.

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