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 population sizes. For example, U.S. GDP was $16.72 trillion in 2013, making it seem the most prosperous country in the world. However, one reason for America's prosperity is because it's the third most populous country (after China and India). The U.S. must spread its wealth among 319 million people. As a result, its GDP per capita is only $52,800, making it the 13th most prosperous country per person.
The European Union (EU) is the world's second most prosperous economy, at $15.83 trillion. It's an economy made up of 29 separate countries. Its GDP per capita was only $34,500 because it must spread the wealth among 509 million people. Japan's GDP per capita was slightly higher, at $37,100, because it can spread the benefits of its economy among only 127 million people. China's GDP per capita was only $9,800 because it has four times the number of people (1.36 billion) as does the U.S. Even though its GDP is $13.37 trillion, right below the EU., 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 has doubled, to $4,900, in just six years. (Source: CIA World Factbook)
Ten Highest GDP per CapitaThe most prosperous country per person is Qatar - its GDP per capita is $102,100. The other countries in the Top Ten are:
- Liechtenstein -- $89,400
- Bermuda -- $86,000
- Macau -- $82,400
- Luxembourg -- $77,900
- Monaco -- $65,500
- Singapore -- $62,400
- Jersey -- $57,000
- Norway -- $55,400
- Falkland Islands -- $55,400
Only two of the top ten (Qatar, Norway) 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, three oil-exporting countries (Brunei, UAE and Kuwait) have dropped off the list.
The Falkland Islands may become an oil-exporting nation, as surveys show reserves that could produce 500,000 barrels per day by 2016. The Islands also sell fishing licenses to foreign ships within its exclusive zone. The population of Falkland Islands is only 3,140. Macau rose to its position by becoming a gaming center for mainland China. It's really just a city/state, with a population of 550,000.
The other six 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 CapitaThe world's poorest countries, according to GDP per capita, are:
- Madagascar -- $1,000
- Tokelau -- $1,000
- Malawi -- $900
- Niger -- $800
- Liberia -- $700
- Central African Republic -- $700
- Burundi -- $600
- Zimbabwe -- $600
- Somalia -- $600
- Democratic Republic of the Congo -- $400
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 $19.91 billion, according to exchange rates. However, since the cost of living is so low, its GDP using purchasing power parity is higher, at $34.29 billion.
Since there are so many people, this production is spread out very thin -- only $1,100 per person. According to GDP per capita, Afghanistan ranks down at 214th in wealth, just barely missing being one of the ten poorest countries in the world. Article updated March 16, 2014