Per Capita Income in the Country’s Economic Development

Per Capita Income in the Country's Economic Development – Per capita income in the Big Indonesian Dictionary or KBBI means national income divided by the total population. Income per capita is the amount of an average income of all residents in a country. Income per capita certainly has something to do with the economy in a country. The following is a more detailed understanding of per capita income, the function of per capita income for a country, and the factors that affect per capita income.

Understanding Per capita Income

Per Capita Income in the Country's Economic Development

Per capita income is a calculation of the income of the total population in the country, where per capita income is the result of the country’s national income. The income per capita of a country can increase if the average income of the population of that country increases or is high.

So income per capita is one way to build the economy of a country. Per capita income is also a measure of the state of social welfare in a country. Economic income is a process in increasing total income and per capita income in the country. Per capita income is also useful to see the development in the country, but it is also useful to see the average income of individuals in the country.

Per capita income data in a country is useful for analyzing the development that occurs in a country. In addition, the calculation of per capita income is useful for seeing how the development of welfare in a country, changes in the level of welfare in a country, and predicting per capita income in the future.

Characteristics of Economic Development

Economic development for a country is very important. With rapid economic development, it can increase per capita income in the country for a long time. Economic development has the following characteristics:

  1. Economic development takes place continuously or continuously.
  2. Efforts to increase per capita income. In which the country can be said to have an economic development if there is an increase in per capita income. The increase is one form of welfare of the population in the country.Therefore a country will always try to increase its per capita income.
    If  wants to know how the economy is developing,  can read the book “Economics of Development and Planning” which As #Friends Without Borders we always try to give the best.
  3. The increase in per capita income has increased over a long period of time. This happens if the average income increases from year to year, then the income per capita must continue to increase. If income does fall, but the decline is not too far away.
  4. The occurrence of technological or institutional changes. If in a country there is an increase in per capita income, not only the economy is advancing rapidly but also the technology in a country is also advancing.

Economic Growth Factors

The development of a country is a measure of whether the country’s economy is developed or not. Economic development is the stage of increasing total income. The success of economic growth in a country is influenced by several factors, such as the following:

1. Natural resources or SDA

Natural resources owned by each country are the most important wealth of its role in a country. Natural resources are divided into two, namely biological natural resources and non-biological natural resources.

Biological natural resources are all natural wealth or everything that comes from plants and animals. Examples of biological natural resources, such as chickens, goats, cows, tea, coffee, wood and many more. While non-biological natural resources are resources that are not from living things. Non-biological natural resources cannot be used as food. Examples of non-biological natural resources, such as water, wind, sunlight and mining products.

Natural resources have a role as the basis of materials for a production. If natural resources in a country do not exist, then the country needs to look for economic materials abroad. If a country has abundant resources, then the country can process them very well so that the expenditure is not too high.

2. Population growth or human resources (HR)

Humans also have an important role in the processing of natural resources. The role of humans is to manage existing natural resources so that they can be used as the basis for production materials.

Humans are also needed in the development of a country. This is because humans have ideas that are also useful for development, human resources who have competence and seriousness in carrying out these activities and businesses. If natural resources are managed by people who do not have the competence, it can harm the existing natural resources.

As human resources who will build the economy of a country. can read the book “Human Resource Economics in a development perspective”

3. Advances in Science and Technology or Science and Technology

Human resources and natural resources in a country are certainly very useful if they maximize science and technology. Humans who have good competence and quality humans, of course they will equip themselves with knowledge and also an understanding of a new technology and science.

Therefore, to get a successful and smooth development, it certainly requires many parts in it. Not only that, it is necessary to have different knowledge and skills possessed by humans so that each process can be carried out properly.

4. Socio-cultural

In addition, social factors that exist in the community also affect the economic development of a country. If the culture that exists in society is by emphasizing discipline, diligence and agility, then these things can build the country’s economy.

The cooperation that is established is also very important in achieving economic development. If each individual has a strong spirit of cooperation, it will make it easier to carry out collaboration in various fields for development. Surely this will affect the results for the economic conditions in the country.

5. Political Situation in the Country

The policies taken by the government are certainly very influential for the country’s economy. If the policy taken in a country is closely related to a political and economic right, it can lift the country’s economic development.

In addition, development also includes if the political conditions in a country are stable and harmonious, of course it can encourage the rate of economic growth. It is different if politics is unstable and there is no harmony between the parties, it will also affect the pace of the economy in a country. Politics is also very influential for the development of the country’s economy.

6. Government System in the Country

The system of government in a country is also very influential on economic development. If a country’s system of government is liberal, then its economy is also liberal. So it can be said that the system of government in the country is one of the factors in the development of the country’s economy. If the state system is good, the country’s economy will run well, and vice versa.

Meanwhile, the government in Indonesia uses a democratic system, where people have freedom but still get supervision from the government so that it is controlled and stable.

7. State Infrastructure

Facilities and infrastructure support the country’s economy. If the facilities and infrastructure are complete, then development can be carried out easily and more optimally. If the facilities and infrastructure are not supported, then there can be obstacles in development.

Per Capita Income Calculation Function

The calculation of per capita income occurs once a year. The function of calculating per capita income is as follows:

1. Knowing the development of a country

Per capita income is useful for seeing the average income of the people of a country, so with this the per capita income function is to determine the development of a country. Is there any development from year to year or even no development?

2. As a reference for taking policies in the future

With the increase in per capita income, the data can be used as a reference for a country whether the next year and so on per capita income will increase. So the government can take a policy in the present to the future.

3. Reviewing the quality of the country’s economy

The income per capita function is useful for reviewing the economic quality of the people in a country in a certain time. This is because the per capita income data is used as an analysis in the country’s evaluation. With this, the state can see where it is lacking and what steps will be taken in the future.

4. Smooth implementation of the country’s economy

With the per capita income, a country can assess whether economic activity is running smoothly. Countries can assess this with per capita income data.

Components of Per capita Income

The following are the components in per capita income, namely:

1. National Income

National income is the amount of state income in one year. The values of per capita income and national income are comparable. The higher the national income, the higher the per capita income. And vice versa, if a national income decreases, then the level of income per capita is low.

2. Population

The total number of people living in a country is the total population. So the ratio of per capita income and population is inversely proportional. If the total population is high, then the per capita income is low. Vice versa, if the amount of income is low, then the income per capita is high.

Countries by Per capita Income

The function of per capita income data can see the economic condition of a country. Then there are several groups of countries on the calculation of per capita income, as follows:

1. High-income countries

A country can be said to be high-income if its per capita income is more than USD. 8,355. Groups of high-income countries are usually from developed countries, such as Singapore, Japan, America and other developed countries.

2. Upper middle income countries

A country can be said to be middle-to-high income if the average per capita income is $4,046 to $8,335. Groups of upper middle income countries, such as countries in Europe, Belgium, France, Canada.

3. Lower-middle income countries

A country can be said to be lower-middle income if its per capita income is between $675 and $4,046. For Indonesia, it is included in the category worth $3,870.

4. Low-income countries

A low-income country, if the average per capita income is less than $675. Low-income countries are mostly from African countries and conflict areas, such as Nigeria, Uganda, Somalia, Ethiopia, Afghanistan and other countries.

Negative and Positive Impacts of Per capita Income

a. Positive impact

  1. Streamlining the implementation of economic activities that accelerate the process of economic growth
  2. Creating jobs that can reduce unemployment
  3. Improving the level of national income
  4. Improving people’s welfare

b. Negative impact

  1. Increase environmental damage
  2. Reduced agricultural land
  3. Pollution of water, air and soil

Impact of Increasing Income in Indonesia:

With the increase in per capita income in Indonesia, will it have a positive or negative impact? The following explains the positive impact of increasing income in Indonesia:

1. Stability and consistency of improvement in Indonesia’s economic indicators

The increase in income status in Indonesia means that Indonesia has succeeded in maintaining the stability and consistent growth of Indonesia’s economic indicators over the last twenty years. If it continues to grow into the future, then Indonesia can get an increase in per capita income.

2. Increasing Indonesia in international cooperation

With the improvement of Indonesia in terms of economy, it can be said that Indonesia has a higher capability. So this is an opportunity to establish international cooperation.

3. Increasing investment and improving Indonesia’s balance of transactions

Indonesia can get a lot of trust from other countries to invest. The quality of Indonesian products can also be ascertained to be more competitive. Increasing investment and the quality of products and services produced by Indonesia, increases Indonesia’s growth and also records an improvement in the balance of transactions in Indonesia.

In addition, the increase in income also has negative impacts, such as:

1. Indonesia is considered capable of repaying borrowed money with higher interest rates.

As a country, of course, Indonesia has debt. With the increase in income, other countries or countries that provide debt think that the Indonesian state is able to pay higher interest rates. The impact will increase the cost of government debt which then becomes expensive.

2. A number of countries have reasons to revoke trade facilities in Indonesia

Many countries that have trade partners with Indonesia provide trade facilities that benefit Indonesian products. Some of the Indonesian products that have benefited include textile products, apparel, agriculture, fisheries, chocolate and wood products. With the improvement of Indonesia’s status, it can be a reason for trading partner countries to revoke facilities and cause losses and Indonesia’s economic slowdown.

3. The high income gap in Indonesia

Overall GNI per capita in Indonesia has increased quite a bit. Many people are curious about this data, because their income is still stagnant or unchanged. This happens because of income inequality in Indonesia, the distribution of income in Indonesia is uneven. In measuring the level of income inequality, an index called the Gini ratio is used. The higher the country’s ratio, the higher the country’s level of inequality.

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