The gap between where you earn and where you spend
It has a name. Geo-arbitrage.
Here’s what nobody tells you about the Canadian who spends winters in Vietnam.
She’s not on vacation. She’s running an arbitrage.
Not the financial kind, with stocks and bonds and split-second trades. Something older and more fundamental. She’s exploiting the gap between what a dollar earns in Halifax and what a dollar buys in Hanoi.
The math is almost embarrassing in its simplicity. According to Numbeo, a crowdsourced cost-of-living database with nearly 2 million price entries across 5,500 cities, someone spending $4,900 Canadian per month in Halifax could maintain the exact same standard of living in Hanoi for roughly $2,500. Same quality of restaurants. Same tier of apartment. Same access to healthcare, internet, coffee shops.
Half the price.
That gap—between where you earn and where you spend—has a name. Geo-arbitrage. And while the term sounds like something invented by a Silicon Valley founder trying to optimize his tax situation, it actually represents one of the few ways globalization can tilt in favor of individuals rather than corporations.
A 2016 paper published in the IOP Conference Series by Jillian Penney and Konrad Dramowicz set out to map this phenomenon with academic rigor. They weren’t content to leave geo-arbitrage as a lifestyle buzzword. They wanted to quantify it. Model it. Build tools that could identify which countries offer the best opportunities for people with mobile income—and more importantly, which factors actually matter when you’re deciding where to live.
The findings complicate the simple narrative. Cheap isn’t always good. Safe isn’t always expensive. And the optimal destination changes dramatically depending on who you are.
Tim Ferriss popularized the term geo-arbitrage in his 2007 book “The 4-Hour Workweek,” which has since sold over 1.4 million copies worldwide and been translated into dozens of languages. His formula was seductive: automate your income, disconnect your earnings from your location, then move somewhere your money goes further. Strong Western salary minus lower Eastern cost of living equals more beer, as one geo-arbitrage blog put it.
But Ferriss was selling a lifestyle. Penney and Dramowicz wanted to build a framework.
Their research draws on an older concept called the Five Flag Theory, which describes how to strategically arrange your affairs across different countries. The five flags are your business base, your passport, your domicile, your asset repository, and your playgrounds. Each flag serves a different purpose. Your business operates where taxes are favorable. Your citizenship comes from a country that doesn’t care what its citizens do abroad. Your home is somewhere with good infrastructure and no threat of war. Your assets sit in a jurisdiction with banking secrecy. And you actually spend your time in places that make you happy.
This isn’t tax evasion. It’s geographic optimization. The same logic that leads a corporation to incorporate in Delaware and headquarter in Singapore can apply, at a smaller scale, to individuals with the right kind of income.
The researchers collected data on approximately 200 countries across fourteen criteria. Cost of living, obviously. But also quality of life, safety ratings, healthcare quality, disease risk, air and water quality, sanitation infrastructure, internet and phone access, import-export costs, biodiversity, distance from Canada, and the percentage of the population that speaks English.
That last variable matters more than you might expect. The data came from Wikipedia, which tracked English-speaking populations in 124 countries. The researchers assumed countries not on the list had few or no English speakers. For many Canadians considering geo-arbitrage, language barriers represent a hard constraint. You can adapt to different food, different weather, different social norms. But if you can’t communicate with your neighbors, your landlord, or a doctor in an emergency, the savings start to look less appealing.
Here’s where the research gets interesting. Penney and Dramowicz didn’t assume everyone values the same things. They built five different user profiles—student, IT professional, retiree, entrepreneur, volunteer—and mapped how different priorities produce radically different country recommendations.
A student might weight cost of living heavily but care less about healthcare quality, betting on youth and good health. An IT professional needs robust internet infrastructure above almost everything else. A retiree might prioritize healthcare and safety even at the expense of lower savings. An entrepreneur cares about import-export costs and communications infrastructure. A volunteer might accept higher disease risk and lower safety ratings in exchange for the chance to do meaningful work.
The same model, fed different inputs, produces different outputs. Vietnam and Laos emerge as top destinations when cost of living dominates the calculation. But shift the weights toward quality of life, water quality, sanitation, and healthcare, and suddenly Norway, Australia, and Sweden climb to the top. Those countries aren’t cheap. But if you’re optimizing for different variables, cheap becomes less important.
This is the insight that lifestyle gurus tend to skip over. Geo-arbitrage isn’t about finding the cheapest place to live. It’s about finding the place where your particular values and circumstances produce the highest return on investment. And that calculation is intensely personal.
The researchers built two prototype tools. The first uses controlled weights behind the scenes, allowing users to rank each criterion as not important, somewhat important, or very important. The second lets users assign specific numerical weights to each factor, with all weights summing to one hundred percent. Both approaches produce a list of target countries, mapped visually with detailed information about each destination.
The data sources reflect the complexity of the problem. Economic indicators came primarily from the World Bank’s World Development Indicators, one of the most comprehensive datasets available, covering 244 countries across 1,261 variables. Human development data came from the United Nations Development Program. Real-time cost of living data came from Numbeo. Safety warnings came from Foreign Affairs and International Trade Canada, which maintains a regularly updated system tracking everything from natural disasters to terrorism threats.
There’s a risk factor buried in the research that deserves attention. Currency volatility. The paper notes that strong inflation in certain countries—Russia, Argentina, Colombia, Botswana were cited as examples—can erode savings held in local currencies. But this risk can be offset by purchasing locally-priced goods like housing or food, or by taking advantage of services that are heavily discounted relative to home country prices. In other words, spend your arbitrage gains immediately rather than saving them in the local economy.
The Canadian diaspora is already substantial. Close to 2.8 million Canadians live abroad, encouraged by government programs like International Experience Canada and various work-abroad and volunteer placement services. Most go as teachers or volunteers. But the infrastructure exists for something more ambitious.
Consider the seasonal worker. Someone who earns the majority of their income from April to October and has winters free. They could identify target countries using tools like the ones Penney and Dramowicz developed, make arrangements to live abroad during the cold months, and effectively double their purchasing power for half the year. If they own property in Canada, they could rent it for more than the mortgage payment while living off the proceeds in a country where those proceeds stretch twice as far.
This isn’t permanent emigration. It’s strategic positioning. You maintain your Canadian ties, your healthcare coverage, your passport. You just spend your money where it buys more.
The prototypes the researchers developed include features designed for ongoing monitoring. Each country profile links to Numbeo’s detailed cost comparisons and to the Canadian government’s current travel warnings. Because geo-arbitrage destinations aren’t static. The political situation in some countries changes dramatically. A country that looks optimal on paper might be experiencing civil unrest or a disease outbreak that wouldn’t show up in historical data.
Jean-Marc Hachey’s guide “The Big Guide for Living and Working Overseas” provides context for why this matters. Moving abroad isn’t just a financial decision. It’s a life reorganization. The successful geo-arbitrageur needs to think about healthcare access, legal status, social integration, and exit strategies. The money saved means nothing if you’re miserable, sick, or trapped.
The Five Flag Theory emerged from offshore wealth management, but its logic applies to anyone trying to optimize across geographic variables. The insight is that different countries excel at different things. No single country is best at everything. The person who recognizes this and structures their life accordingly gains advantages that compound over time.
Globalization is usually framed as something that benefits large entities. Multinational corporations can shift production to wherever labor is cheapest and sell products wherever consumers are richest. Capital flows across borders with minimal friction. But individuals face barriers—visa requirements, language gaps, cultural adjustment, distance from family. The promise of geo-arbitrage is that some of those barriers are lower than they appear, and the benefits of crossing them are larger than people assume.
The academic contribution of Penney and Dramowicz is the framework. Before their research, geo-arbitrage was mostly anecdotal. Blog posts about living cheaply in Thailand. Reddit threads comparing rent in Lisbon versus London. Their work imposes structure on the question. What data matters? How should different factors be weighted? How do you build a decision support system that accounts for individual variation?
The answer involves tradeoffs. Always tradeoffs. The cheap countries tend to have worse infrastructure. The safe countries tend to be expensive. The English-speaking countries cluster in certain regions. Distance from home correlates with flight costs. Healthcare quality varies independently from all other variables. No country maximizes every dimension simultaneously.
But you’re not looking for the perfect country. You’re looking for the right country for you. And the right country depends on your income structure, your risk tolerance, your language abilities, your health status, your family situation, your professional requirements, and your personal preferences.
The tools exist to make this calculation. The data exists to inform it. The only remaining question is whether you’re willing to take the gap seriously—to look at the difference between what you earn and what you spend, and ask whether that difference could be working harder.
In Halifax, you spend four thousand nine hundred dollars a month to live your life. In Hanoi, you spend two thousand five hundred for the same thing.
The difference isn’t magic. It’s geography. And geography, unlike most things in life, is something you can change.
Sources
Penney, J., and K. Dramowicz. “Geographical Aspects of Geo-Arbitrage: Work in Canada and Live in Countries with Low Cost of Living.” IOP Conference Series: Earth and Environmental Science 34 (2016): 012025.
Ferriss, Timothy. The 4-Hour Workweek, Expanded and Updated. Crown Archetype, 2009.
Hachey, Jean-Marc. The Big Guide for Living and Working Overseas. Intercultural Systems, 2004.
World Bank. World Development Indicators. data.worldbank.org.
United Nations Development Programme. International Human Development Indicators. hdr.undp.org.
Numbeo. Cost of Living Database. numbeo.com.