The GDP of a country tells us the size of its market and its importance in the world economy. However, it tells us little about how people live in that country. For this, we have to use indicators of quality of life that give us an idea of the situation of the average person in a given country. The most basic and easily calculated indicator of all is GDP per capita.
In simple terms, GDP per capita is the wealth produced per inhabitant of a country. An eight-portion pizza divided by eight people gives us one serving per person, while a four-portion pizza divided between two people gives us two servings per capita. The people in the second group get more pizza even though the pizza of the first group is bigger.
GDP per capita = GDP / Population
GDP per capita is calculated taking into account purchasing power parity since the same amount of money buys different quantities of products in different countries. If we have two countries, A and B, where A has a GDP per capita of $ 5000 and B one of $ 8000, but prices in A are 50% lower than in B, then the inhabitants of A have a higher purchasing power locally than those of B.
$ 5,000 / 0.50 = $ 10,000
Now that we know the basics, let’s look at the numbers:
(Note: This article has been updated with the release of the October 2016 IMF World Economic Outlook)
The country with the highest GDP per capita in the world is Qatar, with $129.726 per person in 2016 according to data from the International Monetary Fund, almost $30,000 above the second place, Luxembourg, with a GDP per capita of $101,936. As a reference, the GDP per capita of the United States is $57,293.
Within the European Union, the country with the highest GDP per capita is Luxembourg, with the aforementioned number of $101,936, while the poorest is Bulgaria with $20,116, a value similar to that of Argentina and Gabon. In Asia, the country with the highest GDP per capita is Singapore, with $87,082 per person, occupying the third place in the world.
On the other hand, we have the countries with the lowest income in the world, with the Central African Republic being at the bottom with a GDP per capita of $656. The last 10 places on the list are all occupied by African countries, and the nation with the highest GDP per capita of the continent is Equatorial Guinea with $38,699, a number similar to that of Japan.
The GDP per capita of the world, that is to say, the GDP of the entire planet divided among its inhabitants gives us around $16,094. As a point of reference, Costa Rica and the Dominican Republic are the closest countries to this value.
Defining what GDP per capita is necessary to be a developed country is a somewhat useless discussion, take one of the examples above, Japan and Equatorial Guinea have similar GDP per capita, however in Equatorial Guinea 34% of the population does not have access to electricity and its life expectancy is 57 years. While in a country with a much lower GDP per capita, such as Costa Rica, these values are 0.5% y 79 years.
As we said at the beginning, GDP per capita basically tells us how much wealth is produced in a nation per inhabitant, it takes a great wealth to give a decent lifestyle to all the inhabitants of a country, but having great wealth does not mean that the people of a country are benefiting from it. Therefore, if we are going to use GDP per capita to analyze the quality of life anywhere, we also have to analyze how wealth is distributed in that country, and for that, the Gini index is used.