What is the per capita income?

Per capita income, also known as GDP per capita, is a data used in macroeconomía to measure the economic development of a country and its wealth.

Per capita income has usually been used as an indicator of a country's social well-being, understanding that when there is a higher per capita income in a country, there is also a better quality of life for its inhabitants.

Fórmula de la renta per cápita

Per capita income is defined as the ratio between the gross domestic product of a country or GDP and the number of inhabitants of that country. Its calculation is therefore carried out with the following formula:

Per capita income = Gross Domestic Product / No. of inhabitants

Criticisms of per capita income as an indicator

Although per capita income is used as an indicator to measure the well-being of a country. There are numerous critics and voices against that consider that this data does not represent reality with sufficient clarity. Regarding the quality of life that the inhabitants of a country have. Fundamentally for the following reasons.

  • It does not reflect inequalities. First of all, the value of per capita income does not take into account income inequalities. Per capita income is an average. Therefore, it is not valued that within the per capita income of a country there will be a part of the population that will have a much higher income. As well as, another part of the population whose income will be much lower than the per capita income.
  • Assesses aspects that do not interfere with quality of life. The per capita income takes into account values ​​that do not interfere with the quality of life. As for example the expenses in armaments.
  • It does not consider aspects that influence quality of life. On the other hand, the per capita income leaves out of its calculation indicators that do affect the quality of life of the inhabitants of a country, such as the pollution in a territory.

Leave a Comment