Gross domestic product, or GDP for short, is a measurement that describes the value of a geographic location’s total goods and services, and how it relates to the population of the region. Although it is expressed as a dollar amount, GDP per capita is not a measure of average or median personal income. Rather, it is a measure of the relative health of that country’s overall economy and industry.
In order to calculate the GDP per capita of a particular area, the GDP of that location is divided by the total population size. The value that results from this calculation is known as the GDP per capita. The GDP per capita varies drastically worldwide. The gross domestic product of a country is dependent upon the country’s economic standing and overall profits compared to expenses.
GDP per capita is typically expressed in one of two ways: nominal and at PPP (purchasing power parity). While very similar, there is one crucial difference between the two methodologies. GDP per capita (nominal) is a raw figure that does not take into account the differences in the cost of living between one country and another. In contrast, GDP per capita (PPP) factors in each country’s relative cost of living and inflation rate. This makes it arguably more accurate with regard to country-to-country comparisons.
Although widely considered a valuable metric, GDP can be distorted by certain economic conditions. In particular, countries whose tax laws enable them to become corporate "tax havens" often have wildly inflated GDP measurements. Ireland may be the most widely cited example, but the List of Tax Haven Countries also includes Switzerland, the Netherlands, Luxembourg, Hong Kong, Puerto Rico, Singapore, the Cayman Islands, Bermuda, the British Virgin Islands.