Per capita income

The per capita income (abbreviation PKE) is the calculated annualized average income of the inhabitants of a country. To calculate a social product size is shared (eg, gross domestic product, gross national product or national income ) by the population of the country. To determine the real per capita income, one has to take into account the respective inflation.

The yardstick is mainly used to compare the economic situation of different countries with each other. In relation to the population income distribution is also relevant.

The per capita income as an indicator of prosperity

The per capita income has long been regarded as one of the most important indicators for measuring wealth of a country. It shows the average growth of prosperity. With its help, both the economic situation of a country in different time periods, as well as being compared from different countries. However, this average does not include statements about how the income is distributed within a country. So already, a small group of wealthy citizens substantially increase the per capita income of a country. Especially in developing countries, incomes are very unevenly distributed. Although all countries have some degree of inequality of income distribution, but this is seriously higher than in the industrialized countries in the developing world. In particular, prevail on the African continent and in South Asia extremely unequal income distributions. This paints a distorted picture of the quality of life of the population of these countries; usually it's the people much worse than suggested by the per capita income.

There are other arguments against the per capita income as a welfare indicator. So is recorded with this unit, for example, only what can be measured with money, many other factors are also of value, are disregarded. Mention may be made here, for example, unpaid domestic work or moonlighting. Furthermore, for example, reduces involuntary unemployment prosperity. On the other hand lowers a higher preference for leisure, although the net national income, however, has a positive effect on the prosperity of Furthermore, the aspect of the environmental impact of significance. Through various economic activities, the environment is polluted. Expenditures for the removal of this damage reduce prosperity. But the environmental damage themselves, which are wealth- reducing effect will not be captured by the indicator.

All these aspects have led to counter that per capita income is increasingly being replaced by other well-being indicators such as the Human Development Index.

Factors

There are a number of factors that can affect the per capita income in both positive and negative. In a rising immigration, for example, both relevant to the PKE sizes, both social product size used, and the population number. Increases the population of more than, say, the gross national product, the per capita income decreases.

If two countries have the same average labor productivity, but a different number of workers, the per capita income will be equal. Under the assumption of equal population size, the country is with the higher proportion of workers have the higher per capita income. This means that differences in fertility and mortality of the population have a direct impact on the per capita income of a country.

Thus, the increase in the birth rate in the short term leads to a reduction of the per capita income, since in this case the number of workers temporarily decreases. In the long term, the newborn increase again the number of workers, and hence the social product size. If the death rate of a country is higher than the birth rate, the population size, so that the per capita income is higher decreases.

Another aspect that has a positive effect on per capita income, is the increased working hours. With the same number of employees, there is an increase in the labor supply. However, this is problematic in that with a larger number of man-hours decreases the productivity of the workers. Thus, the number of hours worked increases faster than per capita income. The alternative solution here would be to conduct training programs.

A sustained growth in per capita income can only be achieved through constant technical progress. This expands the production possibilities, without having to employ more workers. Technological progress is therefore essential for the growth of an economy.

Countries with low level of technological development, such as Mexico and Romania, have a lower per capita income than countries that are highly developed industrially, such as the United States, England and Germany. States which are more agriculturally developed industrially, so generally have a lower per capita income, and vice versa.

Problems of international income comparison

Data on per capita income are available for almost all countries available, problematic, however, is that it has to be estimated because of insufficient or unreliable data in some cases. Thus, this measure simulates a precision that does not meet all of reality. But not only for this reason designed international comparisons difficult. The conversion of the currency of a country in a comparative currency can lead to significant distortions of the data. Despite ongoing attempts to standardize the calculation basis of the national accounts around the world, there are still major differences between countries. Therefore, the international country comparison made ​​on the basis of per capita income as difficult.