Per capita income

Per capita income is a mathematical method of dividing a total figure (such as national income or production) by the population of an area. The result is a ratio: how much each person would receive if the total were divided equally. The Latin term 'per capita' means 'per head'.

This method is used to compare countries or regions with different populations. A country with large production but a very large population may achieve a lower per capita figure than a smaller country with fewer people.

How it is calculated

The formula is straightforward: the total figure is divided by the population. Examples include per capita GDP (gross domestic product divided by population) and per capita GNI (gross national income). Non-monetary measures are also used, such as water per person, doctors per thousand people, or per capita carbon emissions.

International comparison

When countries are compared, different currencies must be converted to a single standard. Two methods are common: market exchange rates and purchasing power parity (PPP), which accounts for differences in the cost of goods between countries. PPP generally gives a more accurate picture of actual living standards. International bodies such as the World Bank and the International Monetary Fund publish these figures.

Limitations of the measure

The ratio does not show how wealth is distributed. A country in which wealth is concentrated among a small group may have a high ratio even though much of its population lives below the poverty line. For this reason, the ratio is often accompanied by other measures, such as the Gini coefficient, median income, or the human development index. Moreover, household work and informal economies are typically absent from official figures.