8/22/12 Per capita income - Wikipedia, the f ree ency clopedia

Per capita income

From Wikipedia, the free encyclopedia

Per capita income or average income or income per person is a measure of mean income within an economic
aggregate, such as a country or city. It is calculated by taking a measure of all sources of income in the aggregate
(such as GDP or Gross National Income) and dividing it by the total population. It does not attempt to reflect the
distribution of income or wealth.

Per capita income as a measure of prosperity

Per capita income is often used as a measure of the wealth of the population of a nation, particularly in comparison
to other nations. It is usually expressed in terms of a commonly used international currency such as the Euro or
United States dollar, and is useful because it is widely known, easily calculated from readily-available GDP and
population estimates, and produces a useful statistic for comparison.

Per capita income has several weaknesses as a measurement of prosperity:

As it is a mean value, it does not reflect income distribution. If the distribution of income within a country is
skewed, a small wealthy class can increase per capita income far above that of the majority of the
population. In this respect Median income is a more useful measure of prosperity than per capita income,
because it is less influenced by the outliers.

Economic activity that does not result in monetary income, such as service provided within the family, or for
barter, are usually not counted. The importance of these services varies widely among different economies.

Comparisons of per capita income over time need to take into account changes in prices. Without using
measures of income adjusted for inflation, they will tend to overstate the effects of economic growth.

International comparisons can be distorted by differences in the costs of living between countries that aren't
reflected in exchange rates. Where the objective of the comparison is to look at differences in living
standards between countries, using a measure of per capita income adjusted for differences in purchasing
power parity more accurately reflects the differences in what people are actually able to buy with their
money.

See also
List of countries by GDP (nominal) per capitaGDP at market or government official exchange rates per
inhabitant
List of countries by GDP (PPP) per capitaGDP calculated at purchasing power parity (PPP) exchange
per inhabitant
List of countries by GNI per capita
List of countries by income equality
Total personal income

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Categories: Income
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