Develop and improve products. List of Partners vendors. Part of. Unemployment Rate. Table of Contents Expand. Table of Contents. By Kimberly Amadeo. Learn about our editorial policies. Reviewed by Gordon Scott. Learn about our Financial Review Board. It's a good representation of a country's standard of living. It also describes how much citizens benefit from their country's economy.
Article Sources. Part Of. Your Privacy Rights. Major Economies. South-Eastern Europe. Sub-Saharan Africa. Central America. Monetary and Financial Sector. Precious Metals. Region Reports. Country Reports. Annual Subscriptions. What is GDP per capita? Some may be appropriated by government to build up sovereign wealth funds or to pay off debts, some may be appropriated by firms to build up balance sheets, and yet some may be appropriated by parent companies abroad repatriating profits from their affiliates.
At the same time, households can also receive income from abroad for example from dividends and interest receipts through investments abroad.
The above-mentioned factors can create significant differences between measures of household disposable income per capita and GDP per capita. This reflects in part repatriated and redistributed profits from US multinational activities abroad but also relatively lower general government expenditure and taxes on households..
On the other hand, Norway falls from 1 st on a GDP basis to 4 th on a household disposable income basis while Ireland drops dramatically from 4 th to 19 th. For Ireland, one of the reasons relates to the presence of a significant number of foreign affiliates of multinational enterprises responsible for around half of private sector GDP. Similar differences in household disposable income per capita relative to GDP per capita can also be seen in other countries where foreign affiliates play an important role in overall GDP and that have only limited outward foreign investment such as Hungary and the Czech Republic.
Switzerland also sees falls in its household income vs GDP ranking, partly because of the relatively large number of cross-border workers. Note: Data refer to for household adjusted disposable income for Mexico, New Zealand, and Switzerland.
Developments in household disposable income per capita can also differ significantly from developments in GDP per capita. Many factors can also contribute to diverging patterns of growth between household disposable income and GDP, for instance, declining shares of compensation of employees in value-added, and rising shares of profits retained by corporations.
Income per capita is another measure for global prosperity analysis, though it is less broadly used. At its most basic interpretation, per capita GDP shows how much economic production value can be attributed to each individual citizen. Alternatively, this translates to a measure of national wealth since GDP market value per person also readily serves as a prosperity measure.
GDP itself is the primary measure of a country's economic productivity. A country's GDP shows the market value of goods and services it produces. Economists watch this quarterly report closely for the quarter over quarter and annual growth figures that can assist them in analyzing the overall health of the economy. Legislators use GDP when making fiscal policy decisions. GDP can also influence central bankers when they are deciding on the course of future monetary policy.
Economists use this metric for insight on both their own country's domestic productivity as well as the productivity of other countries.
Therefore, it can be important to understand how each factor contributes to the overall result and how each factor is affecting per capita GDP growth. Governments can use per capita GDP to understand how the economy is growing with its population. There can be several numerical relationships that affect per capita GDP.
Some countries may have high per capita GDP but a small population which usually means they have built up a self-sufficient economy based on an abundance of special resources.
A nation may have consistent economic growth but if its population is growing faster than its GDP, per capita GDP growth will be negative. This is not a problem for most established economies , as even a tepid pace of economic growth can still outpace their population growth rates. However, countries with low levels of per capita GDP to begin with—including many nations in Africa—can have rapidly increasing populations with little GDP growth, resulting in a steady erosion of living standards.
Global analysis of per capita GDP helps provide comparable insight on economic prosperity and economic developments across the globe. Both GDP and population are factors in the per capita equation. Countries may also see a significant increase in per capita GDP as they become more advanced through technological progressions.
Technology can be a revolutionary factor that helps countries increase their per capita ranking with a stable population level. Economies such as China and India have achieved per capita GDP growth rates well above the global average in the 21st century despite their populations of over a billion people apiece, thanks to the financial reforms initiated by China in the late s and India in the mids.
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