14

Lists of countries by GDP/capita suffer the problem of giving the mean value (i.e. the classical average, total GDP/population). This can lead to countries that have a few fantastically wealthy people making the value very large.

Often in statistics we use the median value in such skewed distribution cases - i.e. the 50% point, where half of the values will be higher, and half lower.

Instinctively I feel this would give a more representative value - roughly what a person living in that country would generate and be able to spend in a year.

Is it meaningful to talk about a median GDP/capita, or GDP/household for a country, and does anyone assemble such statistics?

  • I believe that median household income is more often used these days than per capita measures, when looking at the economic prosperity of different nations/societies. – PoloHoleSet Jun 24 at 14:30
18

Is it meaningful to talk about a median GDP/capita, or GDP/household for a country, and does anyone assemble such statistics?

Simply put: no, it isn't meaningful. GDP is a property of the whole economy, it's not equivalent to individual wealth or income. GDP/capita is not the mean of some household property, it's a way to scale the GDP to compare countries of different sizes and neutralize straightforward demographic effects.

Generally speaking, a more productive economy will be able to provide higher standards of living to its residents and all indicators of how rich a society is (mean household income, mean consumption, GNI/capita, GDP/capita) will be empirically correlated but the differences between them can tell you something about the structure of the economy (how entrenched inequalities are, how important export-oriented industries or foreign direct investment are, attitudes towards debt, etc.) Part of the GDP can also be repatriated or (partially) reinvested by companies under foreign ownership or invested in a sovereign fund, thus not being counted as part of the income of any one local household, rich or poor.

| improve this answer | |
12

Anna Diofasi and Nancy Birdsall from the Center for Global Development have collated a dataset ranking countries based on their median daily income or consumption using the World Bank's PovcalNet database, based on 2011 PPPs. This dataset was then used by Hauke Hillebrandt from the Giving What We Can charity to produce this comparison of Median GDP/capita vs Mean GDP/capita, as well as a crude estimate of median household GDP. The median value ranges from the lowest, Madagascar, at $383.25, to Norway, at $21,717.50.

Unfortunately, the Google Maps visualisation on the latter page seems to be broken, so I've recreated it.

enter image description here

The limitations of this dataset relate not only to the availability of survey data from the World Bank - various survey years are used ranging from 1992 (Trinidad and Tobago) to 2013 - but also the varied use of consumption or income data to produce the median estimate. In addition, Hillebrandt notes that "Of course, income only gives a limited picture of a country," but reckons that the statistics are still useful to get a "general sense of the economic well-being of its people."

Both sources agree that the use of the mean GDP value is sometimes misleading - Hillebrandt states that it doesn't take into account wealth inequality, and the CGDEV notes:

Average or mean-based measures of income, such as GDP per capita, will always be higher than the median — the value at the midpoint — of that distribution, which is inevitably skewed to the right. So medians convey far better the material well-being of the typical individual in a country and have other advantages including simplicity and durability. The simplicity helps explain why the stagnation of the median wage is so often cited in the US press in the context of middle-class decline as the benefits of growth go to the top. Real median household income has been about $53,000 a year or $48 a day per person for a family of three. That puts median income per person in the US at only just about one-third of average income measured as GNI per capita.

| improve this answer | |
6

Calculating the gross domestic product on a personal level would be impractical and of little benefit. GDP is defined as:

A monetary measure of the market value of all the final goods and services produced in a specific time period

GDP doesn't measure wealth, it measures productivity.

So what is the GDP of a single person? It would be the monetary value of the goods and services they personally create. But most goods and services are not created by a single person alone. They are created by groups of people employed at a company and working in collaboration. So with the exception of self-employed people with no employees, its something which is very difficult to assess on a per-person level. And its even more difficult for people in leadership positions. For example, what's the GDP generated by Jeff Bezos? Does he create all the wealth Amazon creates per year? Or do his 840,000 employees? How much of Amazon's economic output is thanks to Bezos' management and how much is thanks to the personal effort of his employees? How do you assess that in an objective manner?

If you would go to the trouble to determine your personal contribution to GDP, then what that would tell you is how much you personally contribute to the economy, but not how much you personally benefit from that. You could use this as leverage in your next salary negotiation, but it does not tell you how much better or worse you are off compared to the rest of the population.


If you want to measure wealth disparity, then a much better tool for that is to determine the median income per person or per household - how much money the average citizen actually receives and can then use to benefit from the wealth created by the rest of the economy. It might also be interesting to keep in mind whether you look at gross or net median income to visualize the effects of taxation and welfare on different income groups.

| improve this answer | |
  • 2
    @user253751 No, it's not. You salary is what your employer pays you for your contribution, but the contribution is what people pay to the company. The distinction becomes relevant on a macroeconomical level if you take imports and exports into account. Including imports and exports of labor (people working for foreign companies). – Philipp Jun 24 at 14:26
  • 1
    @user253751 Another example: Consider an unemployed welfare receiver or retiree. They receive money from the government, so they have an income. But their contribution to GDP is zero, because they don't create any goods or services. – Philipp Jun 24 at 14:30
  • 1
    The last paragraph is confusing: Wealth and income are also different concepts, the distribution of the former is typically more unequal than that of the latter. – Relaxed Jun 24 at 14:34
  • 1
    @Relaxed It is true that just looking at income does not account for people who already possess a lot of wealth and now just spend it without working anymore. But the way people acquire wealth is usually through income, so income is in many situations a pretty good proxy for the standard of living of different members of a society. – Philipp Jun 24 at 14:39
  • 1
    @Philipp It depends how you define income, I am not sure what point you are trying to make when you write that “the way people acquire wealth is usually through income”. That most wealth is acquired through earned income? That is plainly wrong. That individual wealth comes from wages, investment income, property appreciation, etc. and inheritance then it is a truism. In any case, wealth and income are two different concepts and even if you want to use one as a proxy for something else they shouldn't be conflated. You simply do not measure wealth disparity by looking at median income. – Relaxed Jun 24 at 15:25

You must log in to answer this question.

Not the answer you're looking for? Browse other questions tagged .