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The world's average income is only 39% of the world's GDP per capita,... why?
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This knowledge is free to use under CC-BY License 4.0!
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This file is part of Gapminder's fact-base. Here's the link to the public share folder
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In theory, the global total GDP should be equal to the global total income, but in practice, it's not.
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In Gapminder's bubble charts we often use GDP per capit on the horizontal(x-axis). But in our income-mountains and on Dollar Sttreet we show individual income per day (or month or year).
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The reason we use personal income on income mountains, is to let users position themselves on the global income scale and compare themselves to other individuals.
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One might expect that the 'GDP per capita' is the average daily income multiplied by 365, but if you complete that math exersice, you'll be surprised to find a huge difference between the two numbers.
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When comparing the global differences, mean inomce or GDP per capita both show the same big picture of differences between countries. But when comparing the two for a single country, the differences are huge.
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There are large gaps between A. Mean survey incomes and B. GDP per capita
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Economists don't fully understand the reasons for these huge differences.
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Here's a quick outline of the known reasons for the huge difference, copied from "Appendix A Mean of Income from Surveys or GDP Per Capita? "
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The Future of Worldwide Income Distribution
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https://piie.com/publications/working-papers/future-worldwide-income-distribution
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A. GDP per capita"...significantly overstates household disposable income because GDP includes items such as depreciation, retained earnings of corporations, and government revenues that are not distributed back to households as cash transfers (Anand and Segal 2008). In the United States, for example, the Bureau of Economic Analysis National Income and Product Accounts indicate that disposable personal income was about 74 percent of GDP in 2013. is gap may be much larger in developing countries where a signi cant share of government revenue ends up in sovereign wealth funds or a signi cant portion of GDP represents pro ts of foreign multinationals that are repatriated. Although the United States and a few other countries report personal disposable income in their national accounts, most do not."
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B. Income"Household surveys likely understate income both because the rich are underrepresented in the responses and because when the rich respond they tend to underreport their incomes. Tax returns data from the World Top Incomes Database, which should o er a more accurate picture of the incomes of the rich (though even these data may be subject to downward bias due to tax avoidance and evasion), show that the share of income going to the top 5 percent of taxpayers ranged from 17 percent (Denmark) to 37 percent (United States) in recent years (out of a small sample of countries for which these data are available)."
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Graph and data from page 37 in the same paper
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https://piie.com/publications/working-papers/future-worldwide-income-distribution
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Country
Rate income / GDPperCap
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Mexico27.12%
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Egypt27.41%
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South Africa31.07%
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Hungary31.17%
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India32.17%
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Colombia32.22%
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Slovak Republic33.81%
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China33.92%
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Czech Republic34.75%
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Peru34.90%
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Ireland36.22%
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Serbia36.24%
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Poland37.42%
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Uruguay37.58%
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Estonia37.87%
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Norway38.02%
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Israel38.18%
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Italy38.55%
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Spain39.76%
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Brazil40.76%
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Greece41.70%
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Russian Federation
41.75%
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Slovenia42.18%
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Netherlands42.86%
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Taiwan43.03%
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Sweden43.46%
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Japan44.37%
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Switzerland44.88%
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Belgium45.08%
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United States46.34%
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South Korea47.52%
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Denmark47.58%
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Austria47.91%
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Germany48.40%
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Australia49.26%
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France49.35%
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Finland49.82%
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United Kingdom50.00%
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Guatemala50.03%
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Canada50.58%
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