Definition of Per Capita Income

In the media communication economic figures appear daily to explain some aspect of reality: GDP, Minimum salary, CPI, Trade balance and many others. One of the indicators more important is the income per capita. Per capita income of a country is understood as the relationship between its gross domestic product or GDP and the number of inhabitants. In other words, if GDP is the value of goods and services generated by a economy In a year, the per capita income is the result of dividing the GDP among the inhabitants of a country. For this reason, in economics it is very common to speak of GDP per capita. Usually the reference currency used to set this parameter is the dollar.

A hypothetical example

Let's imagine a nation that has a GDP in a given year that reaches 200 billion dollars and that nation has a population of 20 million inhabitants. Consequently, per capita income will be $ 10,000 per year, as a result of dividing $ 200 billion by $ 20 million. The $ 10,000 per year per person (per capita is the

expression Latina employed and means precisely per person) is the average amount of income of an individual, that is, what he earns in a year.

This figure must be interpreted properly, because there are people who significantly exceed this number and others reach a significantly lower figure. However, the average value of per capita income allows a rough idea of ​​how an average citizen of a country can live.

A measure to understand the economy of a country

Economists remind us of a general principle worth remembering: the more a country's currency devalues, the more the lower its per capita income and, in parallel, the more a country's currency appreciates, the higher its per capita income. capita. Thus, the value of per capita income expresses the level of wealth of a nation and, to a large extent, the quality of life of its inhabitants.

If we speak in comparative terms, it makes sense to recall some statistical data taking as reference year 2013: Luxembourg exceeded $ 110,000 per capita income and ranked first in world level; Norway, Qatar and Switzerland respectively occupied the 2nd, 3rd, and 4th position in the ranking, Spain was in position 25, Uruguay at 36, Chile at 37, Argentina at 38 and Venezuela at 40 (Venezuelans had an income per person of 14,400 Dollars).

With the economic data of per capita income it is possible to obtain another important magnitude: the average amount of money with which one person lives every day (in some nations its inhabitants live on approximately one dollar a day, for example in Zimbabwe, Nepal. Lesotho or Mozambique).

Photo: iStock - Maica

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