2.25: Gross National Income per Capita

​Gross National Income (GNI) per capita is a widely used economic indicator that reflects the average income earned per person in a given country. It is calculated by dividing the total GNI by the country's population, allowing for meaningful comparisons of living standards across nations. For instance, in 2022, Norway's GNI per capita was approximately $95,510, significantly higher than India's, which stood at about $2,390. Despite differences in total GNI, Norway's smaller population and high national income yield a much higher average income per person, suggesting a higher general standard of living. ​

Currency Conversion and Adjustments

To standardize comparisons, GNI is converted into a common currency, typically U.S. dollars. However, simple exchange rate conversions can misrepresent economic realities due to market volatility and differing costs of living. Institutions like the World Bank address this by using multi-year average exchange rates and adjusting for inflation. For example, countries such as Argentina, which experience frequent currency fluctuations, benefit from these adjustments to produce more stable and comparable income estimates. ​

Limitations of GNI per Capita

While informative, GNI per capita does not capture income distribution within a country. The United States, with a GNI per capita of about $76,370 in 2022, has significant income inequality, which this measure alone does not reveal. Additionally, it overlooks differences in purchasing power. For instance, China's GNI per capita might appear modest when converted directly to dollars, but adjusted for purchasing power parity (PPP), it better reflects domestic living standards. ​

Broader Measures: The Human Development Index

To offer a more comprehensive perspective, the Human Development Index (HDI) combines GNI per capita with life expectancy and educational indicators. In 2022, Switzerland ranked highest in HDI with a score of 0.967, reflecting not only high-income levels but also strong health and education systems. In contrast, countries like Chad, with low GNI and limited access to health and education, ranked near the bottom, underscoring the value of multidimensional assessments of development.

GNI per capita represents the average income earned per person in a country. It is calculated by dividing a country's Gross National Income by its total population.

This metric helps compare living standards across countries.

For instance, if Country A and Country B both have a GNI of $1 million, but Country A has only half the population of Country B, its GNI per capita is twice as high, suggesting a potentially higher average standard of living for its residents.

To enable meaningful comparisons, GNI is converted into a common currency—usually U.S. dollars.

Since exchange rates fluctuate and may not reflect local purchasing power, institutions like the World Bank use multi-year average exchange rates and adjust for inflation.

Although GNI per capita is a useful development indicator, it does not capture income inequality or variations in the cost of living.

To get a fuller picture of development, indices like the Human Development Index are used.

HDI combines GNI per capita with indicators of current health, such as life expectancy, and future productive capacity, such as education. In this way, HDI provides a more holistic view of human well-being.