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 see 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 production and income.

 

Per capita has a very precise legal definition. It means to divide an estate equally among all living beneficiaries. The other method is per stirpes. That means to divide the estate equally between the branches of the family. That's 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 stands for Gross Domestic Product. That 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 total 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 more, see GDP per Capita.

For example, U.S. GDP was $17.9 trillion in 2015. That makes it the world's third-largest economy. The United States was also the world's third most populous country. It has 320 million people. That means its GDP per capita was $56,300. That makes the United States the 12th most prosperous country per person. 

Real GDP per capita removes the effects of price changes. That allows you to compare one country's GDP per capita over time. For that, you need to use real GDP. For more, see Real GDP per Capita.

Income 

Gross National Income per capita is GDP per capita plus income from dividends and interest earned overseas. According to the World Bank, the 2014 GNI per capita for the U.S. was $55,230. The 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. (Source: World Bank, GNI per Capita)

U.S. income per capita is $28,757 in 2014 (most recent estimates). 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 your home.

It also counts government payments, such as Social Security, welfare, and government pensions. It does not include food stamps, Medicare/Medicaid, or tax refunds.  (Source: U.S. Census, Table P-1. Total CPS Population and Per Capita IncomeTable PINC-1. Total 2014 Selected Characteristics of People 15 and Older.)

Gross National Product per capita measures all income earned by a country's residents and businesses.  It includes their income from foreign investments. For companies, that includes products manufactured overseas. GNP doesn't count income earned in the United States by foreign residents or businesses. That's how it differs from GDP. Gross National Product per capita is GNP divided by the number of people living in the country.  GNP per capita is no longer commonly used. The World Bank has replaced it by GNI per capita.

The Bureau of Economic Analysis replaced it with GDP per capita in 1991. For more on the difference between GDP and GNP, see Gross Domestic Product as a Measure of U.S. Production.