Per capita income, more simply known as income per person, is the mean income within an economic aggregate such as a country or city. It is calculated by taking a measure of all sources of income in the aggregate (such as GDP or Gross national income) and dividing it by the total population.
Per capita income as a measure of prosperity
Per capita income is often used as average income, a measure of the wealth of the population of a nation, particularly in comparison to other nations.per capita income is often used to measure a country's standerd of living. It is usually expressed in terms of a commonly used international currency such as the Euro or United States dollar, and is useful because it is widely known, easily calculated from readily-available GDP and population estimates, and produces a useful statistic for comparison of wealth between sovereign territories.
Critics claim that per capita income has several weaknesses as an accurate measurement of prosperity:
- Comparisons of per capita income over time need to take into account changes in prices. Without using measures of income adjusted for inflation, they will tend to overstate the effects of economic growth.
- International comparisons can be distorted by differences in the costs of living between countries that aren't reflected in exchange rates. Where the objective of the comparison is to look at differences in living standards between countries, using a measure of per capita income adjusted for differences in purchasing power parity more accurately reflects the differences in what people are actually able to buy with their money.
See also
- List of countries by GDP (nominal) per capita—GDP at market or government official exchange rates per inhabitant
- List of countries by GDP (PPP) per capita—GDP calculated at purchasing power parity (PPP) exchange per inhabitant
- List of countries by GNI (nominal, Atlas method) per capita
- List of countries by GNI (PPP) per capita
- List of countries by income equality
- Total personal income