– Mississippi has similar GDP per capita ($53061) than Germany ($54291) and the UK ($51075), so why are people in Mississippi so much poorer with a much lower living standard?

Question

I was surprised to learn that poor states like Mississippi have about the same gdp per capita as rich developed countries. How can this be true? Why is there such a different standard of living?

In: Economics

Answer 1

GDP per capita is an average figure and doesn’t account for how wealth is actually distributed. For example, a state or country can have a few very rich people, and their wealth can pull up the average GDP per capita, even if the majority of people aren’t doing well. Also the cost of living can be very different so that with the same amount of money, a person might struggle in one country but be well off in another one. The US in general is quite expensive.

In Mississippi, income inequality is quite high, meaning that a smaller group of people have a lot of wealth, while many others might be struggling. In contrast, Germany and the UK tend to have more evenly distributed income and stronger social systems, like universal healthcare, more robust unemployment benefits, and affordable education. This means that even people who earn less in these countries have access to services and opportunities that improve their quality of life.