What Is GDP Per Capita?
A country's GDP or gross domestic product is calculated by taking into account the monetary worth of a nation's goods and services over a certain period of time, usually one year. It's a measure of economic activity. This amount of wealth is divided among the country's population to tell us its GDP per capita.
For example, according to the Bureau of Economic Analysis, the U.S. GDP in 2021 was $23.9 trillion. With a population of 332 million in 2021, according to the Census bureau, that means the U.S. GDP per capita was $71,343.
How Does GDP Per Capita Work?
Essentially, GDP per capita acts as a metric for determining a country's economic output per each person living there. Often, rich nations with smaller populations tend to have higher per capita GDP. Once you do the math, the wealth is spread among fewer people, which raises a country's GDP.
The fact that the GDP per capita divides a country's economic output by its total population makes it a good measurement of a country's standard of living, especially since it tells you how prosperous a country feels to each of its citizens.
How To Calculate GDP Per Capita
The formula is GDP divided by population. If you’re looking at just one point in time in one country, then you can use regular “nominal” GDP divided by the current population. “Nominal” means GDP per capita is measured in current dollars.
If you want to compare GDP per capita between countries, you have to use a metric called purchase power parity. It creates parity between economies by comparing a basket of similar goods. It's a complicated formula that values a country's currency by what it can buy in that country, not just by its value as measured by currency exchange rates.
World Economies and GDP Per Capita Using PPP
The U.S. is the third most populous country after China and India. According to the CIA World Factbook (which all of the following comparisons are based on), the U.S. real purchase power parity GDP for 2020 was $60,200, which placed it 17th in the ranking.
GDP per capita allows you to compare the prosperity of countries with different population sizes.
China, with both the largest economy and the most people, has a per capita GDP of $16,400. That places it 102nd on the list.
India, the world's second most populous nation has an estimated GDP per capita of $6,100, 163rd on the World Factbook's list.
Countries With Highest GDP Per Capita
The countries with the highest economic production per person have thriving economies and few residents. The top 10 GDP per capita according to the CIA World Factbook are:
- Liechtenstein: $139,100
- Monaco: $115,700
- Luxembourg: $110,300
- Singapore: $93,400
- Ireland: $89,700
- Qatar: $85,300
- Isle of Man: $84,600
- Bermuda: $81,800
- Cayman Islands: $73,600
- Falkland Islands: $70,800
Countries With Lowest GDP Per Capita
The world's poorest countries, as measured by GDP per capita, according to the CIA World Factbook:
- Burundi: $700
- Somalia: $800
- Central African Republic: $900
- Democratic Republic of the Congo: $1,100
- Niger: $1,200
- Mozambique: $1,200
- Liberia: $1,400
- Malawi: $1,500
- Madagascar: $1,500
- Chad: $1,500
- GDP per capita is a country’s economic output divided by its population.
- It's a good representation of a country's standard of living.
- It also describes how much citizens benefit from their country's economy.
- Purchase power parity compares different countries’ economic output using a standardized metric based the a common basket of goods and services.