GDP Per Capita

Definition: GDP per capita is a measurement of how prosperous a country feels to each of its citizens. To understand the definition of GDP per capita, you first need to understand GDP, which is short for Gross Domestic Product. GDP is everything that a country's economy produces in a year. GDP per capita takes a country's production, as measured by GDP, and divides it by the country's total population. Hence, it is the output of a country's economy per person.

Why the Largest Economies Aren't the Richest per Capita

GDP per capita allows you to compare the prosperity of countries with different sizes. For example, GDP in the U.S. was $14.7 trillion in 2010, making the U.S. seemingly the most prosperous country in the world. However, one reason for America's prosperity is because it's the third most populous country in the world (after China and India). The U.S. must spread its wealth among 313 million people. That makes its GDP per capita only $47,200, the 11th most prosperous country per person.

The European Union (EU) is the world's most prosperous economy, at $14.9 trillion. It's an economy made up of 29 separate countries. Its GDP per capita was only $32,700 because it must spread the wealth among 492 million people. Japan's GDP per capita was slightly higher, at $34,000, because it can spread the benefits of its economy among only 126 million people. China's GDP per capita was only $7,600 because it has four times the number of people (1.3 billion) as does the U.S. Even though its GDP is $10.9 trillion, right below the U.S., it's got to spread the wealth among all those people, making it much poorer on a per capita basis. However, China's GDP per capita is growing quickly, up from only $4,900 three years ago.(Source: CIA World Factbook)

Ten Richest Countries per Capita

The most prosperous country per person is Qatar - its GDP per capita is $179,000. The other countries in the Top Ten are:

1. Liechtenstein -- $141,100
2. Luxembourg -- $82,600
3. Bermuda -- $69,900
4. Singapore -- $62,100
5. Jersey -- $57,000
6. Norway -- $54,600
7. Brunei -- $51,600
8. United Arab Emirates -- $49,600
9. Kuwait -- $48,900

It's no surprise that five of the top ten (Qatar, Norway, Brunei, UAE 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. The other five 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, and so the wealth can be generated and distributed among a small population. In fact, Bermuda has less than 70,000 people living there.

The Ten Poorest Countries per Capita

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

1. Afghanistan -- $900
2. Malawi -- $800
3. Central African Republic -- $700
4. Niger -- $700
5. Eritrea -- $600
6. Somalia -- $600
7. Zimbabwe -- $500
8. Liberia -- $500
9. Burundi -- $300
10. Democratic Republic of the Congo -- $300

Nine of the poorest ten are in Africa. There are many theories as to why African countries are so poor. One of the most credible is because of their size. They cannot build economies of scale with such small populations. U.S. companies have a large domestic market that they can easily use as a test market. Second, many African countries are land-locked, and have no port. They must rely on neighboring countries to get their goods to market. This increases their cost, making their prices less competitive.

How GDP per Capita Is Measured

GDP per capita must be measured using purchasing power parity. This 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. For example, Afghanistan's GDP is $15.6 billion, according to exchange rates. However, since the cost of living is so low, its GDP using purchasing power parity is higher, at $27.36 billion. This makes it the 111th poorest country.

However, since there are so many people, this production is spread out very thin -- only $900 per person. According to GDP per capita, Afghanistan ranks down at 218th in wealth, making it one of the ten poorest countries in the world. (Article updated January 3, 2012)

GDP Frequently Asked Questions

• What Exactly Is GDP?
• What's the Difference Between Real and Nominal GDP?
• What Are the Components of GDP?
• What's the Best Way to Compare GDP Between Countries?
• What's the Difference Between GDP and the GDP Growth Rate?
• What's the Ideal Growth Rate?
• What's the Current GDP Growth Rate?
• What's a Recession?
• What's a Depression?