Per Capita: What It Means, Calculation, How to Use It

China People
One reason China's GDP is so high is because there are so many people. Photo: ChinaFoto Press/Getty Images

Definition: Per capita means per person. It is a Latin term that translates to "by the head."  It's commonly used in statistics, economics and business to report an average per person. It provides a way to approximate how an organization affects each individual. For example, it's used to compare the economic indicators of countries with different population sizes. The most commonly measured indicators are gross domestic product and income.

 

In legal matters, per capita has a very precise definition. It means to divide an estate equally among all living beneficiaries. The other method is per stirpes. That means to divide the estate between the branches of the family, regardless of the number of people in each branch. For more, see Per Capita vs. Per Stirpes.

Calculation and Use

Per capita divides a statistical measurement for an organization by its population. The formula is:

Measurement / Population = Measurement per Capita. 

If the measurement is small, like the incidence of diseases, then per capita is reported as per 100,000 people. For example:

# of Heart Attacks / Population = Heart Attacks per Capita

Heart Attacks per Capita * 100,000 = Heart Attacks per 100,000.

Production

GDP per capita is a country's economic output per person. GDP measures everything produced within a country's borders. It's usually given for a quarter (three months) or a year.

GDP per capita is a country's GDP divided by its population. To compare GDP between countries, you must remove the effects of exchange rates. For that, you need to use purchasing power parity. Fortunately, the CIA World Factbook does this for you. 

For example, U.S. GDP was $18.56 trillion in 2016. That made the United States the world's third-largest economy, after China and the European Union.

 It was also the world's third most populous country. It had 324 million people. When you divide its GDP by its population, you get $57,300. That's its GDP per capita. The U.S. GDP per capita rank fell to 18th. That's because many countries, like Qatar, had reasonable GDP and a small population.

Real GDP per capita removes the effects of price changes. That allows you to compare one country's GDP per capita over time. That’s why you use real GDP. It removes the effects of inflation from one year to the next. If you didn't use real GDP, you might think the country experienced growth when it really just suffered from rising prices. 

Income 

Gross national income per capita is GDP plus income earned by residents from foreign investments divided by the population. It includes income from dividends and interest earned overseas. The World Bank defines this as all income earned by a country's residents and businesses, no matter where the person is working or the business is located. The most recent figures are from 2015.The U.S. GNI per capita was $55,980. (Source: "GNI per Capita," World Bank.)

U.S. income per capita is $30,240. That’s as of 2015, the most recent estimate. It is lower than GNI per capita because it doesn't include business income.

Instead, the U.S. Census compiles its own sources. It includes earned income, but not benefits. It includes investment income, but not capital gains from selling a home. It also counts government payments, such as Social Security, welfare and government pensions. It does not include food stamps, Medicare/Medicaid benefits or tax refunds.  (Sources: "Table P-1. Total CPS Population and Per Capita Income," U.S. Census Bureau. "Table PINC-1. Total 2014 Selected Characteristics of People 15 and Older," U.S. Census Bureau.)

Gross National Product per capita was a measurement very similar to gross national income per capita. It is no longer commonly used. The World Bank replaced it with GNI per capita. The U.S. Bureau of Economic Analysis replaced it with GDP per capita in 1991. GNP measured all income earned by a country's residents and businesses.

 It included their income from foreign investments. For companies, that included products manufactured overseas. GNP didn't count income earned in the United States by foreign residents or businesses. That's how it differed from GDP. For more on the difference between GDP and GNP, see Gross Domestic Product as a Measure of U.S. Production.