[Editor's Note]
In the last issue of the explanation of the city, the author introduced the gross regional product, that is, some concepts related to GDP, to measure whether a city is rich, in addition to looking at the overall economic plate, but also to look at the living standard of each person, per capita GDP as an important variable to measure the standard of living, regional affluence, has been widely concerned. In this issue, we will focus on some of the laws and characteristics behind GDP per capita.
In 2022, New York's GDP per capita was $126,300, Singapore's was $83,000, Tokyo's was $78,000, Paris's was $75,000, London's was $77,100, Hong Kong's was $48,000, and Shanghai's GDP per capita was $27,400.
With a GDP of $18.1 trillion in 2022, China is the world's second-largest economy after the United States. China's per capita GDP in 2022 is 12,800 US dollars, which is still at the income level of a medium-sized country.
So, if a city's GDP is high, will its GDP per capita be high?
1. GDP per capita, a macro indicator that measures the degree of regional affluence
GDP per capita is the ratio of the region's GDP to its population. In development economics, GDP per capita is an important indicator of a region's affluence. A GDP per capita of $20,000 is often used as the "threshold" for entry into developed countries. The economic growth process of various countries also proves that the per capita GDP will have some obvious characteristics in different stages.
When the per capita GDP is 3,000 US dollars, the process of industrialization and urbanization has entered a period of relatively rapid development, and the huge momentum of economic growth can often promote the rapid progress of the whole society. When the per capita GDP reaches 5,000 US dollars, the consumer economy begins to rise, and the supporting service industry usually develops rapidly; when the per capita GDP reaches 8,000 US dollars, some high-end industries can often have some good support, such as the yacht industry is often formed when the per capita GDP reaches about 8,000 US dollars. Of course, at this time, some countries will also face development difficulties, and finding new drivers of economic development has become an important issue for many economies. When the per capita GDP reaches 10,000 US dollars, the autonomy of the economy will be significantly enhanced, and the ability of scientific and technological innovation and the right to speak internationally will gradually become prominent. The United States, the United Kingdom, and Japan entered this stage around the 1980s, and China's per capita GDP officially exceeded $10,000 in 2019.
It is worth mentioning that the economic structure and performance of the first-mover region and the late-developing region are not exactly the same at the same stage of per capita GDP due to the time difference. Just as the World Bank regularly adjusts the criteria for high-income countries. China's per capita GDP of $10,000 in 2019 is not equivalent to the $10,000 that broke through in Europe and the United States in the 1980s. Therefore, for the sake of comparison, constant and purchasing power parity (PPP) adjusted GDP and per capita GDP will also be widely used by scholars at home and abroad.
2. If the GDP of a city is high, will the per capita GDP be high?
Seeing this question, I believe that many people's answer is, not necessarily. From the perspective of the top 10 cities in terms of GDP and per capita GDP in China and the United States, it is indeed "not necessarily". For example, the city with the highest GDP in China is Shanghai, while the city with the highest per capita GDP in the mainland is Ordos, with a per capita GDP of 258,700 yuan in 2022, about 1.4 times that of Shanghai (179,900 yuan). In addition, cities such as Karamay, Yulin and Haixi do not have an advantage in terms of the scale of regional GDP, but because they are resource-based cities with large scale of resource transactions, their per capita GDP can enter the top 10 in the country. The five cities of Beijing, Shanghai, Shenzhen, Suzhou and Nanjing not only have high total GDP, but also high total GDP per capita.
The situation in the United States is not much different, the city with the highest economic aggregate in the United States is the New York metropolitan area, with a total economic size of more than 2 trillion US dollars, but the highest per capita GDP is Midland, a small city of 100,000 people in northwest Texas, which produces about 70 million tons of oil per year, which is a veritable American version of "Ordos". Similarly, the three metropolitan areas of San Francisco, Boston, and New York are not only large in terms of overall economic size, but also rank among the top 10 in the United States in terms of GDP per capita.
It is worth mentioning that in addition to Midland, the resource-based city of Midland, which ranks first, the cities with the highest per capita GDP in the United States, San Francisco, Boston and New York, the three top international metropolises. For example, San Jose, the second-highest GDP per capita and the headquarters of world-class companies such as Apple, Intel, and Google, is the second-highest GDP per capita in San Jose, the world's largest technology innovation base and the headquarters of world-class companies such as Apple, Intel, and Google, and Boulder, the eighth-highest GDP per capita, is the second-largest technology innovation base in the United States. Princeton, which has the third-highest GDP per capita, is home to some of the world's top scientists because of its university and the Institute for Advanced Study (AIS, which is not part of Princeton University, but the two have a close partnership). Home to Amazon, Microsoft, Starbucks, and Boeing (later moved to Chicago), the Seattle metro area is a major industrial innovation center in the United States. Salt Lake City is also an important center city for the electronic information industry and biohealth industry in the United States.
It can be seen that if we talk about the total economic volume of a city, it is still feasible to fight for the size of the population, but to fight for the GDP per capita, it must either have unique resources or have significant innovation capabilities.
Table 1 The 10 cities with the highest GDP and per capita GDP among cities in Chinese mainland in 2022
Source: Compiled by the author based on the city's statistical yearbook
Table 2 The 10 metro areas with the highest GDP and GDP per capita among U.S. cities in 2022
Source: Based on data from the U.S. Bureau of Economic Analysis
Regardless of the typicality of the top 10 cities, if we look at it in a more general sense, there is still a considerable degree of correlation between the high economic aggregate of the city and the high per capita economic volume. For example, in the 337 cities (prefecture-level administrative regions and municipalities directly under the central government) in Chinese mainland, there is a clear nonlinear correlation between GDP and per capita GDP in 2022 (Figure 1), and the correlation can reach 0.37. It is not difficult to understand that in the column related to the scaling law, the author has introduced that GDP as an economic and social indicator has a significant population superlinear relationship, that is, the effect of 1+1>2, assuming that one person engaged in production activities alone will produce 10,000 yuan of GDP, and two people will produce more than 20,000 yuan of GDP in cooperative production, the larger the population size, the interaction between people often increases exponentially. As a result, the marginal effect of GDP generated by one person in a large city will be significantly increased. Therefore, there is still a considerable possibility that large cities with high economic aggregates will also have high per capita economic aggregates.
Fig. 1 Relationship between GDP and per capita GDP of 337 cities in mainland China
3. Per capita GDP is not per capita income, the process from making the cake to sharing the cake
In recent years, some international organizations such as the World Bank have paid more and more attention to GNI per capita Gross National Income, such as the United Nations' Human Development Index (HDI), which originally used GDP per capita as a measure of living standards, one of its three major components (life expectancy, education attainment, and living standards). But since 2010, they have replaced the original GDP per capita indicator by arguing that national income per capita is more indicative of living standards. Cities with a high GDP per capita do not necessarily mean that their per capita income is high and their living standards are good. For example, the aforementioned Ordos, as the first city in Chinese mainland with per capita GDP, has a per capita disposable income of only 48,303 yuan, less than 19% of per capita GDP; while Shanghai's per capita disposable income is 79,610 yuan, accounting for 44% of per capita GDP, so ordinary people obviously feel that Shanghai's living standard is higher than that of Ordos.
GDP per capita is essentially the economic volume generated by each person's labor, while per capita income is the remuneration that individuals receive from their labor. You must know that making cakes is made by everyone, and the process of dividing cakes is not only shared by everyone, but also by some organizations such as the government (in the form of taxes), enterprises (in the form of corporate profits, etc.). Therefore, under normal circumstances, per capita income is significantly lower than per capita GDP, and the ratio of the two can reflect the dividends that individuals share from the entire economic market to a certain extent, reflecting the regular order of social distribution.
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Hosted by Dr. Dai Yuehua of the Shanghai Institute of Development Strategy, the column focuses on the cutting-edge trends of urban science development, explains the general characteristics and laws of urban science and human behavior dynamics in cities, and explores the paths and methods of using cutting-edge urban science theories to optimize urban governance.