GDP Per Capita with its Formula and Country Comparisons
Why the World's Largest Economies Aren't the Richest
GDP per capita is a measure of a country's economic output that accounts for its number of people. It divides the country's gross domestic product by its total population. That makes it a good measurement of a country's standard of living. It tells you how prosperous a country feels to each of its citizens.
- 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.
- Purchasing power parity compares different countries’ economic output.
GDP per Capita Formula
The formula is GDP divided by population, or 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. “Nominal” means GDP per capita is measured in current dollars.
If you want to compare GDP per capita between countries, you must use purchasing power parity. That creates parity, or equality, 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 its exchange rates.
The Largest Economies Aren't the Richest per Capita
U.S. GDP was $20.54 trillion in 2018. But one reason America is so prosperous is that it has so many people.
The United States is the third most populous country after China and India. The United States must spread its wealth among 327.2 million people as of 2018. As a result, the 2018 U.S. GDP per capita was $62,794. That makes it one of the most prosperous countries per person.
GDP per capita allows you to compare the prosperity of countries with different population sizes.
By some measurements, China has the largest GDP in the world. It produced $25.4 trillion (factoring in purchasing power parity) in 2018. But its GDP per capita was only $18,237 because it has four times the number of people as the United States. It's the most populous country in the world, with 1.4 billion people.
The European Union is the world's second most prosperous economy, at $22.4 trillion. It's an economy made up of 27 separate countries. Its GDP per capita was only $43,738 because it must spread the wealth among 513.2 million people. India's GDP was $10.5 trillion but spread among its 1.35 billion people, its GDP per capita was $7,763. Japan's GDP is $5.4 trillion, the fifth largest in the world. Its GDP per capita was $42,798 since it has 126.5 million people.
The 10 Highest GDP per Capita (2018)
The countries with the highest economic production per person have thriving economies and few residents. The top 10 GDP per capita according to the World Bank are:
- Qatar: $126,898
- Macao: $123,892
- Luxembourg: $113,337
- Singapore: $101, 531
- Ireland: $83,203
- Brunei Darussalam: $80,920
- United Arab Emirates: $75,075
- Kuwait: $72,897.6
- Cayman Islands: $72,607.6
- Switzerland: $68,060
Five of the IMF’s top 10 (Qatar, Brunei, Norway, United Arab Emirates, and Kuwait) are oil exporters with small populations. These countries were fortunate enough to have access to a large, abundant natural resource that is not labor-intensive to develop.
The other countries have worked hard to become regional technology or financial centers. Low tax rates and friendly business climates have induced global corporate headquarters to locate there. These sectors are not labor-intensive to develop, so wealth can be generated and distributed among a small population.
The 10 Poorest Countries per Capita (2018)
The world's poorest countries, as measured by GDP per capita (World Bank), are:
- Burundi: $744
- Central African Republic: $860
- Democratic Republic of the Congo: $932
- Niger: $1,063
- Liberia: $1,309
- Malawi: $1,311
- Mozambique: $1,460
- Sierra Leone: $1,602
- Togo: $1,774
- Guinea-Bissau: $1,799
Ten 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. This could be addressed by creating a single market, similar to the European Union.
Second, many African countries are landlocked, meaning they don't have direct access to the global market. They must rely on neighboring countries to get their goods to market. That increases their cost, making their prices less competitive. Even African countries with ports face large transportation costs in getting their goods to other markets.
GDP Related Articles:
UNICEF. “Definitions.” Accessed March 14, 2020.
International Monetary Fund. “Gross Domestic Product: An Economy’s All.” Accessed March 14, 2020.
The World Bank. “What Is the Difference Between Current and Constant Data?” Accessed March 14, 2020.
The World Bank. "GDP, PPP (Current International $)." Accessed March 14, 2020.
The World Bank. "GDP Per Capita, PPP (Current International $)." Accessed March 14, 2020.
European Union. “The Economy.” Accessed March 14, 2020.
World Economic Forum. "How a Single Market Would Transform Africa's Economy." Accessed March 14, 2020.
The World Bank Economic Review. "Economic Geography and Economic Development in Sub-Saharan Africa." Accessed March 14, 2020.
The World Bank. "Poor Places. Rich Places. Can Geography Explain It All?" Accessed March 14, 2020.
Foreign Policy. "Prisoners of Geography." Accessed March 14, 2020.