GDP per capita, income per capita or income per capita is an economic indicator that measures the relationship between the level of income of a country and its population. For this, the Gross Domestic Product (GDP) of said territory is divided by the number of inhabitants.
The use of per capita income as an indicator of wealth or economic stability of a territory makes sense because through its calculation national income is interrelated (through GDP in a specific period) and the inhabitants of this place.
The objective of the GDP per capita is to obtain a data that shows in some way the level of wealth or well-being of that territory at a given time. It is often used as a measure of comparison between different countries, to show differences in economic conditions.
Formula of income per capita or GDP per capita
It is important to point out that the GDP that is usually used when calculating per capita income is that expressed in nominal terms . In other words, current prices of goods and services produced in that period are used and not constant, such as those of real GDP.
However, it is often a disputed ratio because it does not provide sufficient information by ignoring important aspects such as inequality in the distribution of wealth in the countries, the factor of education or the level of development of these places. Although there is normally a direct relationship between the income level of a place and the level of aspects such as health, education and development, per capita income is not always capable of showing absolutely and truthfully the authentic standard of living of a citizen in a certain country.
In this sense, it is often said that this magnitude does not express reality well in situations of inequality or social discontent, especially in situations in which a country’s economy grows but this macroeconomic improvement is not always reflected in the quality of life of the citizen or in their purchasing power .