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PPPs for policy making: a visual guide to using data from the ICP - Chapter 1: The size of the economy and price levels

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Per capita measures

PPP-based GDP per capita (map 1.1) and PPP-based household consumption per capita are sometimes considered indicators of the material well-being of individuals and households within an economy. However, both indicators have shortcomings in this regard. GDP includes certain components and transactions that are arguably less relevant when valuing a household’s current material well-being. For example, the GDP measure assigns high values to “income-rich” economies, such as investment hubs or resource-based countries, where household consumption accounts for a relatively small share of total GDP. This is typically because profits account for a much larger part of national income than wages and salaries. PPP-based household consumption per capita is arguably a better measure of material well-being than GDP per capita. However, this measure only values goods and services acquired by households directly through their own expenditures. This may result in a misrepresentation of the true material well-being of households in some economies as it does not account for goods and services related to housing, health care, recreation and culture, education, and social protection provided by government, charities and nongovernmental organizations.

PPP-based actual individual consumption (AIC) per capita addresses these shortcomings and provides a more accurate measure of the material well-being enjoyed by households in economies across the world. AIC is the sum of the individual consumption expenditures of households, nonprofit institutions serving households (NPISHs), and government. It accounts for goods and services actually consumed by households, irrespective of whether they were purchased and paid for by households directly, or by government, or by nonprofit organizations (map 1.2). Per capita measures use a mid-year population.

Gross national income (GNI) can also be expressed in PPP terms and is defined as the sum of the value added by all resident producers plus any product taxes (less subsidies) not included in the valuation of output plus net receipts of primary income (compensation of employees and property income) from abroad (map 1.3).