Per capita income: Difference between revisions

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[[File:CountriesByGDPPerCapitaNominal2018.png|300px|thumb|2018]]
{{More citations needed|date=January 2024}}{{short description|Average income of an economy}}
'''Per capita income''' or '''average income''' is the [[average]] amount of money a person gets in a year. It is found by [[Division (mathematics)|dividing]] the amount of money in an area by the number of people living there.<ref>[http://www.thefreedictionary.com/per+capita+income Per capita income The Free Dictionary]</ref><ref>[http://www.investopedia.com/terms/i/income-per-capita.asp Income Per Capita Definition, Investopedia]</ref>
[[File:Countries by GNI (nominal) per capita in 2018.png|right|thumb|upright=1.4|[[List of countries by GNI (nominal) per capita|Nominal Gross national income per capita]] as of 2018, according to the [[World Bank]]]]
'''Per capita income''' ('''PCI''') or '''average income''' measures the average income earned per person in a given area (city, region, country, etc.) in a specified year.  


Per capita income is often used to measure an area's average income. The [[currency]] used is often the [[euro]] or the [[US dollar]] as they are widely used international [[currency|currencies]].
In many countries, per capita income is determined using regular population surveys, such as the [[American Community Survey]].<ref>{{Cite web |title=American Community Survey and Puerto Rico Community Survey: 2021 Subject Definitions |url=https://www.census.gov/quickfacts/fact/note/US/INC910222 |access-date=2024-01-28 |website=[[U.S. Census Bureau]] |page=90}}</ref> This allows the calculation of per capita income for both the country as a whole and specific regions or demographic groups. However, comparing per capita income across different countries is often difficult, since methodologies, definitions and data quality can vary greatly.<ref>{{Cite news |title=The world's richest countries in 2023 |url=https://www.economist.com/graphic-detail/2023/12/15/the-worlds-richest-countries-in-2023 |access-date=2024-01-28 |newspaper=The Economist |issn=0013-0613}}</ref><ref name=":0" /> Since the 1990s, the [[OECD]] has conducted regular surveys among its 38 member countries using a standardized methodology and set of questions.<ref name=":0">{{Cite book |last1=Förster |first1=Michael |title=Counting the poor: new thinking about European poverty measures and lessons for the United States |last2=d'Ercole |first2=Marco |date=2012 |publisher=Oxford Univ. Press |isbn=978-0-19-986058-6 |editor-last=Besharov |editor-first=Douglas J. |series=International policy exchange series |location=Oxford |pages=28 |editor-last2=Couch |editor-first2=Kenneth A.}}</ref>


It has been criticised for not accounting for [[inflation]]. This means that it overstates economic growth. It also means that a small number of wealthy people can increase the country's per capita income whilst the rest of the population experience no change. It does not account for the differences in the cost of living between countries.<ref>{{Cite web|url=http://voxeu.org/article/defence-gdp-measure-wellbeing|title=Hooray for GDP! GDP as a measure of wellbeing|first=Nicholas|last=Oulton|date=22 December 2012|publisher=VOX, CEPR's Policy Portal|access-date=2 September 2016}}</ref>
Per capita income is often used to measure a sector's average income and compare the wealth of different populations. Per capita income is also often used to measure a country's [[standard of living]]. When used to compare income levels of different countries, it is usually expressed using a commonly used international currency, such as the [[euro]] or [[United States dollar]]. It is one of the three components of the [[Human Development Index]] of a country.


==References==
==Limitations==
{{reflist}}
While per capita income can be useful for many economic studies, it is important to keep in mind its limitations.
* Comparisons of per capita income over time need to consider inflation. Without adjusting for [[inflation]], figures tend to overstate the effects of economic growth.
* International comparisons can be distorted by cost of living differences not reflected in exchange rates. Where the objective is to compare living standards between countries, adjusting for differences in [[purchasing power parity]] will more accurately reflect what people are actually able to buy with their money.
* It is a [[mean]] value and does not reflect [[income inequality|income distribution]]. If a country's income distribution is skewed, a small wealthy class can increase per capita income substantially while the majority of the population has no change in income. In this respect, [[median income]] is more useful when measuring of prosperity than per capita income, as it is less influenced by outliers.
* Non-monetary activity, such as barter or services provided within the family, is usually not counted. The importance of these services varies widely among economies.
* Per capita income does not consider whether income is invested in factors likely to improve the area's development, such as health, education, or infrastructure.


[[Category:Income]]
==See also==
[[Category:Economics]]
* [[Disposable household and per capita income]]
[[Category:Economic indicators|income]]
* [[List of countries by average wage]]
* [[List of countries by GDP (nominal) per capita]]—GDP at market or government official exchange rates per inhabitant
* [[List of countries by GDP (PPP) per capita]]—GDP calculated at [[purchasing power parity]] (PPP) exchange per inhabitant
* [[List of countries by GNI (nominal) per capita]]
* [[List of countries by GNI (PPP) per capita]]
* [[Real income]]
* [[List of countries by GNI per capita growth]]
* [[List of countries by income equality]]
* [[Total personal income]]
* [[List of U.S. states by adjusted per capita personal income]]


== References ==
<references />


{{stub}}
{{Global economic classifications}}
{{United States locations by per capita income}}
 
[[Category:Gross domestic product]]
[[Category:Macroeconomic indicators]]

Latest revision as of 21:29, 23 March 2026

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Nominal Gross national income per capita as of 2018, according to the World Bank

Per capita income (PCI) or average income measures the average income earned per person in a given area (city, region, country, etc.) in a specified year.

In many countries, per capita income is determined using regular population surveys, such as the American Community Survey.[1] This allows the calculation of per capita income for both the country as a whole and specific regions or demographic groups. However, comparing per capita income across different countries is often difficult, since methodologies, definitions and data quality can vary greatly.[2][3] Since the 1990s, the OECD has conducted regular surveys among its 38 member countries using a standardized methodology and set of questions.[3]

Per capita income is often used to measure a sector's average income and compare the wealth of different populations. Per capita income is also often used to measure a country's standard of living. When used to compare income levels of different countries, it is usually expressed using a commonly used international currency, such as the euro or United States dollar. It is one of the three components of the Human Development Index of a country.

Limitations[edit | edit source]

While per capita income can be useful for many economic studies, it is important to keep in mind its limitations.

  • Comparisons of per capita income over time need to consider inflation. Without adjusting for inflation, figures tend to overstate the effects of economic growth.
  • International comparisons can be distorted by cost of living differences not reflected in exchange rates. Where the objective is to compare living standards between countries, adjusting for differences in purchasing power parity will more accurately reflect what people are actually able to buy with their money.
  • It is a mean value and does not reflect income distribution. If a country's income distribution is skewed, a small wealthy class can increase per capita income substantially while the majority of the population has no change in income. In this respect, median income is more useful when measuring of prosperity than per capita income, as it is less influenced by outliers.
  • Non-monetary activity, such as barter or services provided within the family, is usually not counted. The importance of these services varies widely among economies.
  • Per capita income does not consider whether income is invested in factors likely to improve the area's development, such as health, education, or infrastructure.

See also[edit | edit source]

References[edit | edit source]

  1. ↑ "American Community Survey and Puerto Rico Community Survey: 2021 Subject Definitions". U.S. Census Bureau. p. 90. Retrieved 2024-01-28.
  2. ↑ "The world's richest countries in 2023". The Economist. ISSN 0013-0613. Retrieved 2024-01-28.
  3. ↑ 3.0 3.1 Förster, Michael; d'Ercole, Marco (2012). Besharov, Douglas J.; Couch, Kenneth A. (eds.). Counting the poor: new thinking about European poverty measures and lessons for the United States. International policy exchange series. Oxford: Oxford Univ. Press. p. 28. ISBN 978-0-19-986058-6.

Template:Global economic classifications Template:United States locations by per capita income

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