GDP Per Capita: Formula, U.S. Compared to Highest and Lowest

Why the World's Largest Economies Aren't the Richest

Factory workers planning a project
Manufacturing improves a country's GDP per capita. Photo: Jetta Productions/Getty Images

Definition: GDP per capita is a measure of a country's economic output that accounts for population. It divides the country's gross domestic product by its total population. That makes it the best measurement of a country's standard of living. It tells you how prosperous a country feels to each of its citizens.

GDP per Capita Formula

The formula is GDP/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.

Here's the current U.S. GDP.

If you want to compare GDP per capita between countries, you must use the purchasing power parity GDP. That creates parity, or equality, between countries 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 its exchange rates. You can find every country’s purchasing power parity GDP in the CIA World Factbook.

If you want to compare GDP per capita over time, then you must use real GDP per capita. That removes the effects of price changes.

Why the Largest Economies Aren't the Richest per Capita

GDP per capita allows you to compare the prosperity of countries with different population sizes. For example, U.S. GDP was $18.56 trillion in 2016. But one reason America is so prosperous is it has so many people. It's the third most populous country after China and India.

The United States must spread its wealth among 324 million people. As a result, its GDP per capita is only $57,300. That makes it the 18th most prosperous country per person.

China has the largest GDP in the world, producing $21.2 trillion in 2016. But its GDP per capita was only $15,400 because it has four times the number of people as the United States.

It's the most populous country in the world, with 1.37 billion people. 

The European Union is the world's second most prosperous economy, at $19.2 trillion. It's an economy made up of 28 separate countries. Its GDP per capita was only $37,800 because it must spread the wealth among 508 million people. India's GDP was $8.7 trillion, but spread among its 1.3 billion people, its GDP per capita was $6,700. Japan's GDP is $4.9 trillion, the fifth largest in the world. Its GDP per capita was $38,900 since it has 126 million people. (Source: CIA World Factbook.)

Ten Highest GDP per Capita (2016)

The countries with the highest economic production per person have thriving economies and few residents. The top ten GDP/capita are:

  1. Qatar – $129,700
  2. Luxembourg – $102,000
  3. Liechtenstein – $89,400 
  4. Singapore – $87,100
  5. Bermuda – $85,700 (2013 estimate)
  6. Isle of Man – $83,100 (2007 estimate)
  7. Brunei – $79,700
  8. Monaco – $78,700 (2013 estimate)
  9. Kuwait – $71,300
  10. Ireland – $69,400

Three of the top ten (Qatar, Brunei and Kuwait) are oil exporters with small populations. These countries were fortunate enough to have a large, abundant natural resource that is not labor intensive to develop. Since 2010, two oil-exporting countries (UAE and Norway) have dropped off the list.

 

The other seven countries have worked hard to become regional financial centers. Low tax rates and friendly business climates have induced global corporate headquarters to locate there. Financial services are also not labor intensive to develop, so the wealth can be generated and distributed among a small population. In fact, Bermuda has less than 70,000 people.

The Ten Poorest Countries per Capita (2016)

The world's poorest countries, according to GDP per capita, are:

  1. Somalia – $400 (2014 estimate)
  2. Central African Republic – $700
  3. Burundi – $800
  4. Democratic Republic of the Congo – $800
  5. Liberia – $900
  6. Tokelau – $1,000 (1993 estimate)
  7. Malawi – $1,100
  8. Niger – $1,100
  9. Mozambique – $1,200
  10. Guinea – $1,300

Nine of the world's poorest countries are in Africa. There are many theories as to why African countries are so poor.

One of the most credible is simply because of their size. Small countries cannot build economies of scale. Unlike U.S. companies, they don’t have a large domestic market they can easily use as a test market. 

Second, many African countries are landlocked, meaning they have no port. They must rely on neighboring countries to get their goods to market. That increases their cost, making their prices less competitive.

Only one of the world's poorest countries is outside of Africa. That's Tokoleau,  an island in the South Pacific that's just three villages. It's supported by New Zealand.  (Source: CIA World Factbook.) 

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